Retirement Calculator: What Your Savings Will Actually Be Worth

The big number is the wrong number

Take the tool’s worked example: someone aged 35 retiring at 67, with £50,000 already saved and £500 a month going in, assuming a 6% annual return. That is a 32-year run, and the headline future value is £918,261. It is also close to meaningless, because those are pounds of the 2050s, not pounds you can spend now. The table below holds every input identical and changes only the inflation assumption — the headline never moves, but what it buys collapses. The examples on this page are worked in pounds; the calculator itself runs in six currencies and the arithmetic is identical whichever you pick.

Illustrative only. Every inflation figure here is a hypothetical assumption chosen to show the shape of the effect — none of them is a prediction, and no rate of return or inflation is guaranteed. Over 32 years a 2.5-point difference in assumed inflation halves the purchasing power of an identical pot. That is why a projection quoted only in future money flatters you, and why this calculator leads with the real figure.

How the real return is worked out

Almost every calculator that bothers with inflation at all just subtracts it: 6% minus 2.5% gives 3.5%. That is an approximation, and it is wrong in your favour. The exact relationship divides rather than subtracts:

With 6% and 2.5% that gives 3.4146% a year, not 3.5%. The gap looks trivial. Compounded monthly over 32 years on the example above, the subtraction shortcut would report £506,112 instead of £496,382 — £9,731 of purchasing power that does not exist, an error you would never notice, in the direction that makes the tool look generous. The calculator uses the exact form.

The rest of the method is deliberately plain, so you can check it:

• Your existing savings grow at the real rate, compounded monthly, for every month between your current age and your retirement age.
• Your monthly saving is treated as a today’s-money amount — so the projection assumes you raise it in line with inflation as the years pass. If you never increase it, your real pot will end up smaller than shown.
• The bar chart splits each year’s real balance into what you put in and what growth added, which is the quickest way to see the crossover point where compounding starts doing more work than you do.
• The pot is multiplied by your withdrawal rate to give an annual and monthly income, again in today’s money, so it is directly comparable to what you spend now.

If you want to see the compounding mechanics on their own, the compound interest calculator isolates them, and compound interest explained walks through the formula step by step.

Turning a pot into an income

A pot is not a plan until you know what income it supports. The withdrawal rate you assume does that conversion, and its reciprocal is the multiple of annual spending you need to accumulate: 4% implies 25× your spending, 3% implies 33×. Small changes to that assumption move the target enormously. Below, the pot you would need for two illustrative income levels, and what the example pot of £496,382 would produce.

All figures in today’s money and illustrative only. At 4% the example pot pays £19,855 a year, about £1,655 a month, before any tax. Moving from 4% to 3% cuts that by a quarter and raises the pot needed for a given income by a third — which is the whole argument between the people who think 4% is too aggressive and the people who think it is too cautious. No withdrawal rate is safe in any guaranteed sense; they are planning heuristics drawn largely from historical data for one market, and history is not a forecast.

Sequence-of-returns risk: the thing calculators hide

This calculator, like every other simple one, applies the same return every single year. Real markets do not. While you are still saving, that simplification is fairly harmless — the order of returns barely matters when you are only adding money. Once you start withdrawing, the order matters enormously, because a fall early in retirement forces you to sell more units to fund the same income, and those units are never there to recover.

Here is the effect stripped to its bones. A £500,000 pot, three years of returns of −15%, −10% and +30% — the same three numbers, in two different orders, with £20,000 drawn at the start of each year:

With no withdrawals the two orders end at exactly the same pound — multiplication does not care about order. Add withdrawals and a £17,100 gap opens in three years on identical returns. Stretch that over a 25- or 30-year retirement and the same mechanism is the difference between a pot that lasts and one that does not. It is the single biggest reason a smooth average-return projection should be read as a rough sighting shot rather than a plan, and it is why the years immediately either side of your retirement date get disproportionate attention from people who do this for a living. What to do about it is a genuine planning question with no one-size answer, and it is exactly the sort of decision worth taking to a regulated adviser.

What this calculator deliberately ignores

A projection you cannot audit is worse than no projection, so this one keeps its variables few and states its omissions plainly. It does not model:

• Tax — on contributions, on growth, or on the income you draw. Retirement tax treatment varies by country, account type and personal circumstances, and getting it wrong by guessing would be worse than leaving it out.
• Fees — platform charges, fund costs and adviser fees all come straight off your return. If you know yours, subtract them from the return you enter before you press anything.
• Employer contributions — often a large share of what actually lands in a workplace pension. Add them to your monthly saving figure if you want them counted.
• Any state pension or public benefit you may be entitled to. Eligibility, age and amount differ by country and change over time, so nothing of the sort is assumed here.
• Variable everything — career breaks, a mortgage ending, children leaving, part-time work in your sixties, a lump sum you did not expect. Real financial lives are lumpy; a compound-growth curve is not.

Used properly, the tool answers one narrow question well: given these assumptions, roughly what would I have, in money I can recognise? Run it three times — pessimistic, central and optimistic — and treat the spread as the answer rather than any single number. If you are working out what you should be saving in the first place, our guides on how much you need to retire and how much of your paycheck to save are the natural next step, and the salary calculator tells you what you have to work with.

This page and this calculator are general information, not financial advice. Nothing here is a recommendation of any product, provider, fund or allocation. Returns are not guaranteed, the value of investments can fall as well as rise, and past performance does not predict future results. For a decision this size, speak to a regulated financial adviser who can look at your full circumstances. Everything runs in your browser; nothing you enter is sent anywhere or stored.

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