Retirement calculator: 401(k) and Social Security

A common target is 25 times your expected annual retirement expenses (based on the 4% rule). If you need $60,000/year in retirement, aim for $1.5 million. However, this varies based on Social Security benefits, pensions, healthcare costs, lifestyle goals, and retirement age. A more personalized approach: estimate your retirement expenses, subtract guaranteed income (Social Security, pensions), and save enough to generate the remaining income at a 3.5-4% withdrawal rate.

You can claim Social Security as early as age 62 or as late as 70. Your "full retirement age" (FRA) is 66-67 depending on your birth year. Claiming at 62 permanently reduces benefits by up to 30%. Waiting past FRA increases benefits by 8% per year until age 70—that's a 77% difference between claiming at 62 versus 70. If you expect to live past 80-82, delaying typically maximizes lifetime benefits. Consider health, finances, and whether you'll continue working.

The 4% rule suggests you can withdraw 4% of your retirement portfolio in year one, then adjust that amount for inflation each year, with a high probability of your money lasting 30 years. It's based on historical US market returns. To use it for planning: multiply your desired annual retirement income by 25 to find your savings target. However, the rule has limitations—it may be too aggressive for early retirees (consider 3-3.5%) and doesn't account for variable spending or sequence of returns risk.

It depends on your situation. Paying off your mortgage eliminates a major expense and provides peace of mind. However, if your mortgage rate is low (under 4-5%) and you could earn more by investing, keeping the mortgage might be mathematically optimal. Consider: your mortgage interest deduction value, your investment risk tolerance, other debts, and the psychological benefit of being debt-free. Many retirees prioritize the security of no mortgage over potentially higher investment returns.

Required Minimum Distributions (RMDs) are mandatory annual withdrawals from Traditional IRAs and 401(k)s starting at age 73 (increased from 72 by SECURE Act 2.0). The IRS calculates your RMD based on your account balance and life expectancy. Failure to take RMDs results in a 25% penalty on the amount not withdrawn (reduced from 50%). Roth IRAs have no RMDs during your lifetime. RMDs can push you into higher tax brackets—consider Roth conversions earlier in retirement to reduce future RMDs.

Inflation erodes purchasing power over time. At 3% annual inflation, $50,000 today has the purchasing power of only $22,000 in 30 years. This is why retirement calculators use "real" (inflation-adjusted) returns. Your investments need to grow faster than inflation to maintain purchasing power. Social Security includes cost-of-living adjustments (COLAs), but these may not fully keep pace with actual inflation. Plan for healthcare costs especially—they typically inflate faster than general inflation.

A Monte Carlo simulation runs thousands of scenarios with randomized market returns to estimate the probability of your retirement plan succeeding. Unlike assuming a fixed 7% return every year, it accounts for real market volatility—some years up 25%, some down 20%. A "90% success rate" means 90 out of 100 simulated scenarios lasted through retirement without running out of money. Aim for 80-90%+ success rate. If lower, consider saving more, retiring later, or spending less.