How to Project Your Retirement Savings (and Why Most People Get It Wrong)
Retirement projections are only as good as their assumptions. Learn to think critically about return rates, inflation, sequence risk, and contribution growth to build a realistic plan.
Retirement is not the end of the road. It is the beginning of the open highway.
— Unknown
Retirement savings is the process of systematically setting aside and investing money during your working years to fund your lifestyle after you stop earning a paycheck. It’s not just about the number you accumulate—it’s about building a portfolio that can reliably generate income for potentially 30+ years.
Key Takeaways
Your savings rate matters more than your return rate—especially early on. A 30-year-old who saves 15% instead of 10% will accumulate roughly 50% more by retirement, regardless of market performance. You control your savings rate; you don’t control the market.
Projections are scenarios, not predictions. Any retirement calculator gives you a range of possibilities based on assumptions. Small changes in those assumptions—particularly your expected return—create wildly different outcomes. Understand the inputs, not just the output.
Employer matching is an instant 50-100% return. If your employer matches contributions, capture every dollar of that match before doing anything else. There’s no investment strategy that beats free money.
Use real returns (after inflation) for planning. Stocks have historically returned about 10% nominally, but only about 7% after inflation. Planning with nominal returns makes your future look rosier than it is.
$134,000
Median retirement savings (ages 55-64)
15%
Recommended savings rate
~7%
Historical real stock return
25-30
Years $1M lasts at 4% withdrawal
What Is It — Projecting Your Future Nest Egg
Think of retirement savings like filling a reservoir that will eventually need to supply water to your home for decades. During your working years, you’re building the dam and filling it up. At retirement, you flip a valve and start drawing from it. The question isn’t just “how much water is in there?”—it’s “how long does it need to last, and will the flow be steady?”
The Three Phases of Retirement Planning
Your retirement journey has three distinct phases, each with different priorities and risks:
Accumulation
Ages 25-55
You’re contributing regularly and have decades for compound growth. Your biggest lever is your savings rate. Market volatility is your friend—downturns let you buy more shares cheaply.
Transition
Ages 55-65
You’re still contributing but shifting toward capital preservation. A market crash here hurts more because you have less time to recover. This is when to gradually reduce risk.
Distribution
Ages 65+
You’re withdrawing from your portfolio. The goal shifts from growth to sustainable income. Sequence of returns risk is at its peak in the first decade of retirement.
Why “Average Return” Is Misleading
Here’s a counterintuitive truth: two portfolios with the exact same average return can end up with dramatically different balances. The order of returns matters—especially when you’re adding or withdrawing money.
Good Sequence
Early gains, late losses during accumulation. You buy more shares when prices are low in your final years, but your earlier contributions had time to grow.
Returns: +15%, +12%, +8%, -5%, -10%
Average return: 4%
$347,000
$100K invested over 5 years
Bad Sequence
Early losses, late gains during accumulation. Your early contributions get crushed before they can compound, and the late rally happens with less capital.
Returns: -10%, -5%, +8%, +12%, +15%
Average return: 4%
$298,000
$100K invested over 5 years
Same average return. $49,000 difference. This is called sequence of returns risk, and it’s why retirement planning requires thinking in scenarios, not single-point projections.
Nominal vs. Real Returns: The Inflation Trap
When someone says “stocks return 10% on average,” they’re quoting nominal returns—before accounting for inflation. But inflation erodes purchasing power by 2-3% annually on average. For planning purposes, you should use real returns: roughly 7% for stocks and 2% for bonds, historically.
The Optimism Trap
Using nominal returns in a retirement calculator makes your future look about 40% better than it actually is. A projection showing $2 million at retirement using 10% returns becomes $1.2 million using 7% real returns. Both numbers might be “correct,” but only one tells you what you can actually buy with that money.
How It Works — Assumptions That Make or Break Your Plan
Every retirement projection is built on a core formula that compounds your contributions over time. Understanding this formula helps you see which assumptions drive the biggest changes in your outcome.
The Core Projection Formula
Future Value of Regular Contributions:
FV = PMT × [((1 + r)n - 1) / r]
FV = Future value (your ending balance)
PMT = Regular contribution amount
r = Rate of return per period
n = Number of periods
This formula assumes consistent contributions and returns—neither of which happens in reality. That’s why we run projections with different assumptions to see a range of outcomes.
How Return Assumptions Change Everything
Let’s take a concrete example: a 30-year-old earning $60,000 who saves 10% of income ($6,000/year). Here’s how their projected balance changes based on different return assumptions:
| Return Assumption | At Age 45 | At Age 55 | At Age 65 |
|---|---|---|---|
| Conservative (5% real) | $150,800 | $379,500 | $541,900 |
| Moderate (7% real) | $188,100 | $506,400 | $829,400 |
| Aggressive (9% real) | $234,400 | $676,800 | $1,294,300 |
*Assumes $6,000 annual contribution, no raises, no employer match. Returns are real (inflation-adjusted).
The difference between 5% and 9% real returns is staggering: $752,400 at age 65. That’s why your return assumption is the most sensitive input in any projection. Use conservative estimates (5-6% real) for planning; treat higher projections as optimistic scenarios, not expectations.
Practical Takeaway
Run your projection at 5%, 7%, and 9% real returns. If your plan only works at 9%, it’s not a plan—it’s a hope. Your baseline should be the conservative estimate; anything better is a bonus.
The Savings Rate vs. Return Rate Showdown
Which matters more: saving more or earning higher returns? The answer depends on where you are in your journey.
Maya: The Aggressive Saver
- • Saves 15% of $60K salary ($9,000/year)
- • Earns moderate 7% real return
- • Invests for 35 years (age 30-65)
- • Total contributions: $315,000
Portfolio at 65:
$1,244,100
Derek: The Return Chaser
- • Saves 10% of $60K salary ($6,000/year)
- • Hopes for aggressive 9% real return
- • Invests for 35 years (age 30-65)
- • Total contributions: $210,000
Portfolio at 65:
$1,294,300
Derek’s portfolio is slightly larger—but only if he actually achieves 9% real returns for 35 years, which is far from guaranteed. Maya contributed $105,000 more but gets a similar outcome with a much more reliable assumption. The savings rate is the lever you control; the return rate is the lever the market controls.
Deterministic vs. Monte Carlo Projections
Simple calculators give you a single number based on fixed assumptions. More sophisticated tools use Monte Carlo simulation—running thousands of scenarios with randomized returns based on historical patterns—to give you a probability distribution.
Deterministic
Shows one outcome: "You'll have $829,000." Simple and easy to understand, but creates false precision. Real returns don't follow a smooth 7% path.
Monte Carlo
Shows a range: "You have a 75% chance of having $600K-$1.2M." More realistic but harder to interpret. Useful for understanding risk, not just expected value.
Rule of Thumb: The 25x Rule
To estimate how much you need to retire, multiply your desired annual retirement income by 25. Want to spend $60,000/year? Aim for $1.5 million. This is the inverse of the 4% safe withdrawal rate and gives you a quick target to sanity-check any projection.
What It Means for You — Building a Realistic Projection
You can’t control the stock market. You can’t control inflation. But you have four powerful levers that directly shape your retirement outcome. Pull them deliberately.
The Four Levers You Control
1. Savings Rate
Aim for 15% minimum, including any employer match. Can't hit 15%? Start where you are and increase by 1% each year until you get there. Most people don't notice a 1% reduction in take-home pay.
2. Start Date
Every year you delay costs you roughly 10% of your potential ending balance. A 25-year-old who starts now will have about 50% more than a 35-year-old who saves the same amount. Time is the multiplier you can't buy back.
3. Return Assumptions
Use 5-6% real returns for conservative planning. If your plan requires 9%+ returns to work, you're taking on more risk than you might realize. Build a plan that works with moderate assumptions.
4. Contribution Growth
Tie your contribution increases to your raises. If you get a 3% raise, bump your contribution by 1-2%. You'll never miss money you never saw, and your savings rate will climb painlessly over time.
Reality Check: The Employer Match
If your employer offers matching contributions, this is the single highest-return investment available to you. A typical 50% match on up to 6% of salary means if you earn $60,000 and contribute $3,600, your employer adds $1,800. That’s a 50% instant return before the money is even invested.
Don’t Leave Money on the Table
About 25% of employees don’t contribute enough to get their full employer match. If you’re one of them, you’re turning down free money. Before optimizing anything else—Roth vs. traditional, fund selection, asset allocation—make sure you’re capturing your full match. This is the one guaranteed return in investing.
What If You’re Starting Late?
If you’re 45 and just getting serious about retirement savings, the math is harder but not hopeless. You have three options, and most people need a combination of all three:
1. Save aggressively.
If you can save 25-30% of your income, you can partially make up for lost time. Catch-up contributions ($7,500 extra in 401(k)s for those 50+) help, but they’re not magic.
2. Work longer.
Every year you delay retirement is a year of additional contributions, a year of investment growth, and one less year of withdrawals. Working until 70 instead of 65 can increase your sustainable retirement income by 30-40%.
3. Adjust expectations.
A more modest retirement lifestyle, relocating to a lower-cost area, or planning for part-time work in early retirement are all legitimate strategies. The goal is a plan that actually works, not a fantasy that doesn’t.
Pro Tip
Automate everything. Set up automatic contributions that increase by 1% each year. Set up automatic rebalancing. The less you have to actively decide, the more likely you are to stay on track. Behavioral consistency beats occasional optimization every time.
The Bottom Line
A retirement projection is only as good as its assumptions. Use conservative return estimates (5-6% real), focus on the levers you control (savings rate and start date), and capture every dollar of employer match. Run multiple scenarios, not just one. The goal isn’t to predict the future—it’s to build a plan robust enough to handle the future’s uncertainty.
Try It Out — Model Your Retirement Trajectory
Use the calculator below to build your own projection. Start with your current situation, then experiment with different scenarios: What if you increased your savings rate by 2%? What if you retired at 67 instead of 65? What if returns are lower than expected? The most valuable insight isn’t the number—it’s understanding how sensitive that number is to your assumptions.
Quick Start Calculator
Projected Balance at 65
$1,394,374
Over 35 years
Total Contributions
$260,000
Growth from Interest
$1,134,374
Years Until Retirement
35 years
Savings Growth Over Time
What to Look For in Your Results
Projected Portfolio Value
Your estimated balance at retirement. Compare this to your target (annual spending × 25) to see if you're on track.
Total Contributions vs. Growth
How much came from your savings versus investment returns. A healthy ratio shows compound growth doing the heavy lifting.
Monthly Retirement Income
Based on the 4% rule, this is the sustainable monthly withdrawal your portfolio could support. Compare this to your expected expenses.
Sensitivity to Assumptions
Run the projection at 5%, 7%, and 9% returns. If the range is too wide for comfort, focus on increasing your savings rate.
Run the Full Analysis
The interactive calculator above is a quick-start version. The full tool offers more inputs, detailed breakdowns, data tables, and CSV export.
Open Full Calculator