Retirement Calculator Formula
Understand the math behind the retirement calculator. Each variable explained with a worked example.
Formulas Used
Estimated Balance at Retirement
retirement_balance = current_savings * pow(1 + monthly_rate, num_months) + monthly_contribution * (pow(1 + monthly_rate, num_months) - 1) / monthly_rateTotal Contributions
total_contributions = current_savings + monthly_contribution * num_monthsInvestment Gains
investment_gains = retirement_balance - total_contributionsVariables
| Variable | Description | Default |
|---|---|---|
current_age | Current Age(years) | 30 |
retirement_age | Retirement Age(years) | 65 |
current_savings | Current Savings(USD) | 50000 |
monthly_contribution | Monthly Contribution(USD) | 500 |
annual_return | Expected Annual Return(%) | 7 |
years_to_retire | Derived value= retirement_age - current_age | calculated |
monthly_rate | Derived value= annual_return / 12 / 100 | calculated |
num_months | Derived value= years_to_retire * 12 | calculated |
How It Works
How Retirement Savings Are Projected
This uses compound growth with regular contributions:
FV = PV(1+r)^n + PMT × [(1+r)^n - 1] / r
The 7% average annual return is a common assumption based on historical stock market performance (adjusted for inflation it is ~4-5%).
Worked Example
Age 30, plan to retire at 65, $50,000 saved, contributing $500/month at 7% return.
current_age = 30retirement_age = 65current_savings = 50000monthly_contribution = 500annual_return = 7
- 01Years to retirement = 65 - 30 = 35 years (420 months)
- 02Monthly rate = 7% / 12 = 0.583%
- 03Current savings grow to: $50,000 × 1.00583^420 = $574,464
- 04Contributions grow to: $500 × (1.00583^420 - 1) / 0.00583 = $893,769
- 05Total at retirement = $574,464 + $893,769 = $1,468,233
Ready to run the numbers?
Open Retirement Calculator