Retirement Calculator

About Retirement Calculator

How the Calculator Works

The projection applies compound growth monthly to your current pot while adding your contribution, then repeats that loop for every month between your current age and your target retirement age. The underlying formula is the future value of a series with an initial balance:

FV = P(1 + r/12)^(12t) + C x [((1 + r/12)^(12t) - 1) / (r/12)]

Here P is current savings, C is monthly contribution, r is the annual return as a decimal, and t is years until retirement. The contribution also grows each year by the annual increase rate, which models real-world salary rises or a rising savings rate.

Worked example: A 30-year-old with £50,000 saved, contributing £500/month at 7% annual return until age 65. After 35 years the pot grows to roughly £1,380,000. About £260,000 is contributions (£50,000 starting balance plus 35 x 12 x £500 = £210,000 in new contributions) and the remaining £1,120,000 is investment growth. At a 4% withdrawal rate that funds about £4,600/month of pre-tax retirement income, lasting around 30 years with 2.5% inflation and 4% real returns.

The 4% Rule Explained

The 4% rule says you can withdraw 4% of your pot in the first year of retirement, increase that amount by inflation each subsequent year, and have a very high chance of the money lasting at least 30 years. It comes from the 1994 Trinity Study by professors Cooley, Hubbard and Walz at Trinity University, who back-tested portfolios across US market history from 1926 onwards and found a 95%+ success rate for a 50/50 stock-bond split over a 30-year retirement.

To find your target retirement fund, flip the formula:

Required Fund = Annual Spending / 0.04 = Annual Spending x 25

Example: If you need £30,000/year in retirement, you need £30,000 x 25 = £750,000.

Monthly Income Needed	Annual	Fund Required (4% Rule)
£1,500	£18,000	£450,000
£2,000	£24,000	£600,000
£2,500	£30,000	£750,000
£3,000	£36,000	£900,000
£4,000	£48,000	£1,200,000

These figures assume the 4% rule as the sole income source. Most retirees also receive state pension or Social Security, which reduces the required fund. The full new UK State Pension is £241.30/week (£12,547.60/year) from April 2026 after the 4.8% triple lock uprating, according to gov.uk and the House of Commons Library. In the US, the average Social Security benefit for retired workers was $2,076.41/month ($24,917/year) in February 2026 following the 2.8% COLA, according to the SSA. A UK couple each receiving the full new state pension effectively covers about £25,000 of annual income before their private pot does any work.

Recent research has also questioned whether 4% is still the right number. Morningstar's 2025 State of Retirement Income report put the "safe" starting withdrawal rate at 3.7% for a 30-year horizon at 50/50 allocations given current bond yields and equity valuations. Bill Bengen, who coined the rule originally, has argued more recently that 4.7% is defensible if equity allocations are higher. A sensible default is to plan around 4% and stay flexible.

How Much to Save by Age

Fidelity's published savings benchmarks suggest aiming for 1x salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. These are rough guides, not hard rules:

Age	Savings Target	Example (£40K salary)
30	1x salary	£40,000
35	2x salary	£80,000
40	3x salary	£120,000
45	4x salary	£160,000
50	6x salary	£240,000
55	7x salary	£280,000
60	8x salary	£320,000
67 (retirement)	10x salary	£400,000

Reality lags the benchmarks badly. In the US, Fidelity reported an average 401(k) balance of $146,400 at the end of 2025, but that average is skewed upward by a few very large accounts - the median is roughly a third of the average for every age band. By generation the averages are $249,300 (Boomers), $192,300 (Gen X), $67,300 (Millennials), and $13,500 (Gen Z). In the UK, the Pensions and Lifetime Savings Association estimates a "moderate" single retirement lifestyle at around £31,700/year and a "comfortable" one at £43,900, which implies a private pot of roughly £330,000-£490,000 alongside the full state pension. The point is that most people are under-saving and the benchmarks above are a target, not a description of typical balances.

Why Starting Early Matters So Much

Compound growth makes starting age the single biggest factor in how big a pot you end up with. Saving £300/month at 7% annual return:

Start Age	Retire at 67	Years Saving	Total Contributed	Final Balance
25	67	42	£151,200	£938,000
30	67	37	£133,200	£637,000
35	67	32	£115,200	£430,000
40	67	27	£97,200	£287,000
45	67	22	£79,200	£188,000
50	67	17	£61,200	£119,000

Starting at 25 instead of 35 means contributing only £36,000 more but ending up with £508,000 more. That gap is pure compound interest doing its work over an extra decade. If you can only do one thing right in retirement planning, it is starting as early as possible - even small contributions matter disproportionately when they have 40 years to grow. Playing catch-up in your 50s with large contributions is possible but brutal: you need roughly 3-4x the monthly contribution to end up in the same place as someone who started at 25.

UK Pension Tax Relief and Allowances

UK pension contributions receive tax relief at your marginal rate, which makes them one of the most tax-efficient ways to save for retirement. For 2026/27 the key numbers are:

• Basic rate taxpayer (20%): A £100 pension contribution costs you £80 (the government adds £20 in tax relief at source)
• Higher rate taxpayer (40%): A £100 contribution effectively costs £60 (£20 automatic relief plus £20 claimed through self-assessment)
• Additional rate (45%): A £100 contribution effectively costs £55
• Annual allowance: £60,000 or 100% of earnings (whichever is lower), per gov.uk. You can also carry forward unused allowance from the previous three tax years.
• Tapered allowance: High earners with adjusted income above £260,000 see the allowance taper down by £1 for every £2 of excess income, to a floor of £10,000.
• Money Purchase Annual Allowance (MPAA): Triggered at £10,000 once you flexibly access a defined contribution pension.
• Salary sacrifice: Also saves National Insurance (8% employee rate), so the effective cost is lower still.

Employer pension matching is effectively free money. If your employer matches up to 5% and you only contribute 3%, you are leaving a guaranteed 2% of salary on the table every month. Workplace schemes under auto-enrolment require a minimum total contribution of 8% of qualifying earnings (3% employer, 5% employee including tax relief), which is the floor, not a target.

What Return Rate Should You Assume?

Historically a global equity portfolio has returned around 5% real (after inflation) over long horizons, while a 60/40 stock-bond portfolio has returned around 4% real. Use these rough guides for the annual return input:

• Conservative (3-4% nominal): Mostly bonds and cash. Lower growth, less volatile. Suitable within 5 years of retirement.
• Moderate (5-6% nominal): Balanced mix of stocks and bonds, which is the default for many UK workplace default funds.
• Aggressive (7-8% nominal): Mostly global equities. Higher expected returns and more volatility. Best for those 15+ years from retirement.

The calculator uses nominal returns (before inflation). To see real purchasing power, subtract your expected inflation rate. The Bank of England's CPI target is 2% and UK CPI was 3.0% in February 2026 according to the ONS. Subtracting 2-3% from your nominal return gives a rough real-return figure.

A common glide-path rule is "your age as the percentage in bonds" (a 30-year-old holds 30% bonds and 70% stocks). Target date funds automate this glide so allocations become more conservative as you approach retirement.

Common Retirement Planning Mistakes

• Assuming returns without inflation: A £1M pot in 35 years is not £1M in today's money. At 2.5% inflation, it is worth roughly £420,000 in today's purchasing power.
• Ignoring fees: A 1% annual platform fee reduces a 35-year pot by roughly 20%. The FCA found the average pension fund charges 0.75-1.0% per year - check yours.
• Over-concentration in employer stock: Holding a large fraction of your pot in a single company (typically the one paying your salary) stacks two risks on top of each other.
• Cashing out small pots when changing jobs: A £5,000 pot at 25 becomes roughly £75,000 by 65 at 7% growth. Transferring is almost always better than withdrawing.
• Waiting for the "right moment" to start: Markets time individual contributions for you over 35 years. Starting a year later typically costs more than any entry-point timing error.

For more specific drawdown projections once you are in retirement, the pension drawdown calculator models how long a pot lasts at different withdrawal rates and sequences of returns. The investment return calculator handles general investment projections without the retirement framing, and the compound interest calculator isolates the compounding maths if you want to experiment with rates and periods.

This tool is for educational purposes only and does not constitute financial advice. All calculations run in your browser. No personal data leaves your device.

Sources

• GOV.UK - State Pension Triple Lock Increase April 2026
• House of Commons Library - Benefits Uprating 2026/27
• SSA - 2026 Cost-of-Living Adjustment Fact Sheet
• Fidelity - Average Retirement Savings by Age
• GOV.UK - Pension Scheme Rates and Allowances
• Pensions and Lifetime Savings Association - Retirement Living Standards
• Morningstar - State of Retirement Income