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Calculator Methodology & Assumptions

Transparency matters, especially for financial tools. This page documents exactly how our retirement calculator works — every default assumption, its source, the math behind it, and what the calculator cannot tell you.

Last reviewed: March 2026

How the Calculator Works — Overview

The RetireWellCalc retirement calculator projects how much money you'll have at retirement based on your current savings, ongoing contributions, and a set of economic assumptions. It then compares that projected balance against your estimated retirement spending need to show whether you're on track — or how far off you are.

All calculations run entirely in your browser using JavaScript. No data you enter is ever sent to our servers or stored anywhere. Your financial information stays on your device.

The Core Formula: Compound Growth

The accumulation phase uses the standard future value of a growing annuity formula:

Future Value = PV × (1 + r)n + PMT × [ ((1 + r)n − 1) / r ]

Where:

  • PV = Present Value (current savings balance)
  • r = Annual rate of return (decimal)
  • n = Number of years until retirement
  • PMT = Annual contribution amount

For the decumulation (withdrawal) phase, we apply a similar compound formula in reverse — beginning with the projected balance, subtracting inflation-adjusted annual withdrawals year by year, and crediting post-retirement investment returns. This produces the year-by-year drawdown projections shown in the advanced view.

Default Assumptions & Their Sources

These are the default values loaded when you open the calculator. You can override every one of them. We've chosen defaults that reflect informed, conservative-to-moderate estimates consistent with mainstream financial planning practice.

Pre-Retirement Return Rate: 7.0%

The default annual return rate of 7.0% is based on a blended forward-looking estimate for a 60/40 portfolio (60% equities, 40% bonds). This figure is consistent with published capital market assumptions from major institutions:

  • Vanguard's 10-year expected return estimate for a balanced portfolio (60/40) centers near 6–8% nominal
  • Historical US stock market returns have averaged approximately 10% nominal / 7% real (inflation-adjusted) over long periods — the 7% default reflects a real-terms approximation in nominal terms at today's low-inflation expectations
  • Oracle's 60/40 blended forward estimate, which incorporates current market valuation levels and consensus long-term projections

Note: Actual returns will vary significantly year to year. The calculator uses a single constant rate — it does not model market volatility or sequence-of-returns risk (see limitations below).

Inflation Rate: 2.5%

The default inflation assumption of 2.5% is drawn from:

  • The Federal Reserve's long-run inflation target of 2.0%
  • Historical US Consumer Price Index (CPI) average of approximately 2.5–3.0% over the past 30 years (source: Bureau of Labor Statistics)
  • A modest buffer above the Fed target to account for real-world spending patterns, particularly in healthcare, which inflates faster than the general CPI

Inflation is applied to both your spending need in retirement and to Social Security benefits (which are indexed to CPI via Cost of Living Adjustments).

Life Expectancy Default: Age 90

We default to a planning horizon of age 90 — a deliberately conservative choice. The goal is to plan for a long life, not an average one.

  • Social Security Administration actuarial tables show that a 65-year-old man has a 25% chance of living past 90; a 65-year-old woman has a 33% chance
  • For couples, the probability that at least one partner lives past 90 is over 50%
  • Planning to age 90 provides a meaningful buffer against longevity risk — running out of money late in life when you have few options to recover

You can adjust this to any age in the calculator. Many financial planners recommend planning to 90–95.

Social Security Income: User-Inputted

Social Security benefits are entered manually. We do not estimate them for you, because:

  • Benefits are highly individual — based on your 35 highest-earning years
  • The claiming age dramatically affects the monthly benefit (claiming at 62 vs. 70 can differ by 76%)
  • Spousal benefits, survivor benefits, and windfall elimination provisions add complexity that varies person to person

To find your estimated Social Security benefit, visit ssa.gov/myaccount and check your Social Security statement. You can also use the official SSA Retirement Estimator.

Post-Retirement Return Rate: 5.0%

Once you retire, the default assumed return on your remaining portfolio drops to 5.0%. This reflects:

  • A more conservative allocation typical of retirees — heavier in bonds and dividend stocks, lighter in growth equities
  • The conventional wisdom that retirees should reduce portfolio volatility as they shift from accumulating assets to drawing them down
  • A spread of roughly 2 percentage points below the pre-retirement rate, consistent with a shift from approximately 60/40 to 40/60 equities/bonds

What the Calculator Does NOT Model

Transparency requires honesty about limitations. The following factors are not incorporated into our projections:

  • Taxes: We do not model income taxes on 401(k) withdrawals, Roth conversions, capital gains taxes, or state income taxes. A dollar in a traditional IRA is worth less at withdrawal than it appears — factor this in with your advisor.
  • Investment fees & expense ratios: Fund fees, advisory fees, and 401(k) plan costs are not deducted. A 1% annual fee can reduce your ending balance by 20–25% over 30 years. Use low-cost index funds to minimize this drag.
  • Market volatility & sequence of returns risk: The calculator uses a constant annual return rate. In reality, a market crash in the first 5 years of retirement can be devastating even if average long-term returns are fine. This is one of the most important real-world retirement risks not captured by simple projections.
  • Variable spending in retirement: The calculator assumes constant inflation-adjusted spending. Most retirees spend more in early retirement (travel, health) and less later — then spike again for medical care.
  • Social Security solvency risk: SSA projections show the trust fund may face a funding shortfall by the mid-2030s absent Congressional action. Benefits may be reduced. We model your input as stable income.
  • Healthcare cost inflation: Medical costs inflate at roughly 4–5% annually, faster than general CPI. Fidelity estimates a 65-year-old couple will need $315,000+ for healthcare in retirement (2024 estimate).
  • Required Minimum Distributions (RMDs): The calculator does not enforce RMD rules for traditional accounts starting at age 73.

When to Use a Financial Advisor

Our calculator is a planning tool — a starting point for understanding your numbers. There are situations where it's wise to consult a qualified professional:

  • You're within 10 years of retirement — the stakes are high enough that a detailed plan is worth the cost
  • You have a pension, stock options, or complex compensation — these require specialized analysis
  • You're navigating Social Security claiming strategy as a couple — the spousal coordination decisions are complex and high-stakes
  • You need a tax-efficient withdrawal strategy — the order in which you draw from Roth, traditional, and taxable accounts significantly affects lifetime taxes
  • You've experienced a major life event — divorce, inheritance, early retirement, or a serious health diagnosis can fundamentally change your financial plan

🏛️ Find a Fee-Only Fiduciary Advisor

We recommend working with a fee-only fiduciary — an advisor who is legally required to act in your interest and does not earn commissions for recommending products. The NAPFA (National Association of Personal Financial Advisors) maintains a searchable directory.

Find a Fiduciary at NAPFA →

Methodology Updates

We review our default assumptions and methodology annually, or whenever a significant change in the economic environment warrants an update. This page is versioned and dated. If you have feedback or corrections, please use the contact information on our About page.

Sources & References