Understanding Your Retirement Nest Egg
A nest egg is the total savings you accumulate for retirement across all accounts — 401(k), IRA, Roth IRA, brokerage, and other investments. The goal is to build a portfolio large enough to sustain your lifestyle for 20–30 years after you stop working. This calculator helps you project whether your current savings trajectory will get you there.
The Power of Compound Interest
Compound interest is the single most powerful force in retirement planning. When your investments earn returns, those returns themselves generate additional returns over time. For example, investing $1,000/month at a 6% annual return starting at age 35 grows to approximately $1.16 million by age 67. Starting 10 years later at age 45 yields only about $560,000 — less than half. Time in the market matters more than timing the market.
Why Monte Carlo Simulation?
A simple linear projection assumes a fixed return rate every year, which rarely matches reality. Monte Carlo simulation runs 500 random market scenarios, each with different sequences of returns, to estimate your probability of success — the likelihood that your portfolio survives through life expectancy. A 75%+ success rate is generally considered adequate; below 50% suggests you should increase savings, delay retirement, or reduce planned spending.
Key Factors That Affect Your Result
- Inflation: At 2.5% annual inflation, $60,000 of today's purchasing power equals about $98,000 in 20 years. Always plan in real (inflation-adjusted) terms.
- Healthcare costs: The average 65-year-old couple retiring in 2026 will need approximately $315,000 in today's dollars for Medicare premiums, out-of-pocket costs, and long-term care. This is often the largest unplanned expense in retirement.
- Social Security timing: Claiming at age 62 reduces benefits by about 30% compared to waiting until full retirement age (67 for most). Delaying until 70 increases benefits by about 24% above the full amount.
Use the calculator below to see how adjusting any of these variables changes your retirement outlook. Small changes — an extra $200/month in contributions, working one more year, or reducing planned expenses by 5% — can significantly improve your readiness score.