Understanding retirement readiness
What retirement readiness means
Readiness is the relationship between your projected portfolio at the planned retirement age and the portfolio required to fill your modeled retirement income gap. It is an estimate tied to the ages and assumptions you enter.
How the earliest retirement age is found
The calculator checks each allowed whole-year age in order and returns the first age where the Base projected portfolio meets the required portfolio within a half-cent tolerance. It does not assume age outcomes are perfectly monotonic.
Why retirement age changes the result
Retiring earlier shortens the accumulation period and lengthens the withdrawal period. A later age usually adds contributions and compound growth while reducing the number of retirement months that need funding.
Projected vs required portfolio
Projected portfolio comes from current balances, contributions, employer contributions, and account returns. Required portfolio is independently solved so monthly withdrawals can cover the target through the selected horizon.
Replacement rate and the target
The replacement rate multiplies current gross income to create a gross retirement income target in today's dollars. It is not a spending budget and does not assume all current income is spent.
Employer contributions
Employer contributions are recorded separately because they add to the portfolio without being personal savings. Scenario contribution adjustments change personal contributions only.
Annual contribution increases
Personal and employer contribution levels step up once every 12 projection months, not a little each month. Contributions are added after monthly return and stop when retirement begins.
Nominal and today's dollars
Nominal dollars show future amounts. Today's dollars divide those values by cumulative inflation to provide a purchasing-power comparison without subtracting inflation directly from investment return.
Social Security, pensions, and COLA
Active retirement income sources reduce the withdrawal required from the portfolio. Each source follows its entered COLA, which may be higher or lower than the inflation rate applied to the target.
Returns before and after retirement
Each account uses its own return while accumulating. After retirement, the accounts form one portfolio and use the entered retirement return while account balances continue to be tracked proportionally.
Monthly withdrawal order
Investment growth or loss is applied to the beginning portfolio first. Other income then reduces the target gap, and the available portfolio funds the remaining withdrawal at month end.
Funding gaps and additional contributions
A funding gap means the projected retirement-date portfolio is below the solved requirement. The additional contribution result is a binary-searched mathematical estimate distributed across accounts; it is not a personal recommendation.
Required contribution by retirement age
For each displayed age, a bounded solver changes total personal monthly contributions and reruns the complete projection. This captures compound growth and annual step-ups; it does not use a simple gap-divided-by-months shortcut.
Returns, inflation, and timing
Higher returns may improve projected funding, while higher inflation raises future income targets. Because both compound and retirement income sources can begin at specific ages, changing assumptions can move the earliest funded age materially.
Projected depletion
Harmful depletion begins only when the portfolio is exhausted and required income is unfunded. A portfolio at zero remains covered when Social Security, pensions, or other sources meet the target.
Life expectancy assumption
Life expectancy sets the end of the planning horizon. It is not a prediction, and changing it can materially change the required portfolio and funding status.
Why compare scenarios
Conservative and optimistic cases show sensitivity to return and personal contribution assumptions. Neither case captures the full range of possible market or life outcomes.
Why there is no 4% rule
The model does not multiply spending by 25 or assume a fixed withdrawal percentage. It simulates the entered income gap, inflation, other income, returns, and withdrawals month by month.
Limits of a deterministic model
Constant assumptions make comparisons transparent, but they cannot represent market volatility, sequence-of-returns risk, job changes, irregular spending, or changes in laws and benefits.
Worked example: how soon could this plan retire?
Using the calculator defaults, a 35-year-old selects age 67 with $110,000.00 invested, $1,000.00 in monthly personal contributions, $300.00 from an employer, and a $60,000.00 annual income target in today's dollars. Account returns are 7%, the retirement return is 5%, and inflation is 2.5%.
At age 67, the production model projects $3,059,369.23 against $1,399,426.09 required. The sequential solver finds age 60 as the earliest fully funded whole-year age under those assumptions. For the earlier age 58 scenario, it solves a required initial personal contribution of $1,325.03 per month, or $325.03 above the current personal contribution.
These are deterministic model estimates generated by the same engine as the calculator, not a forecast, promise, or personal financial recommendation.