Retirement Gap Calculator

How the retirement gap is worked out?

The calculator compares two figures: what your current savings and contributions are projected to be worth at retirement, and what you would need to fund your target income for the length of retirement. The difference is the gap.

Projection uses compound growth on current savings plus regular contributions, with a nominal return assumption you set. Because inflation erodes purchasing power over decades, the target income is also inflated to future terms — skipping this step is the most common reason home-made projections look reassuring and are not.

The required pot is derived from a sustainable withdrawal rate. The widely cited 4% guideline came from a specific historical study of a specific market and is a starting point, not a rule; the calculator lets you lower it, which is what most current analysis recommends.

How do you use the Retirement Gap Calculator?

1. 1.Enter current savings across all retirement accounts, not just one.
2. 2.Use a real return assumption you would defend — 4-6% nominal is a common conservative range for a mixed portfolio.
3. 3.Set your target income in today's money and let the calculator inflate it.
4. 4.Re-run annually; small contribution increases early have outsized effects.

What can this tool not tell you?

• Long projections are highly sensitive to return and inflation assumptions; small changes move the answer enormously.
• It does not model state pensions, tax treatment, property, or sequence-of-returns risk.
• It is general information, not personal financial advice.

Why small assumption changes move the answer enormously?

Retirement projections are exponential calculations dressed up as simple arithmetic, and exponential calculations are unforgiving of small input errors compounded over decades. A return assumption of 5% versus 6% over thirty years does not produce a 20% difference in the final projected pot — because the gap compounds annually, it typically produces a difference of well over 30%, which is larger than most people intuitively expect from what looks like a one-point difference on a form.

Inflation deserves the same scrutiny as the return assumption, and is more often skipped entirely by home-made spreadsheets. A target retirement income that feels comfortable in today's money will not buy the same lifestyle in thirty years' time; at a modest 2.5% average inflation, prices roughly double over twenty-eight years, meaning a target income that is not inflated forward is quietly understating the required pot by a wide margin, regardless of how carefully the growth side of the calculation was done.

Sequence-of-returns risk — the order in which good and bad investment years occur, not just their average — is the factor hardest to capture in a single projection and the one most likely to matter in the first few years after retirement begins, when withdrawals start compounding losses rather than growth compounding gains. Two people with identical average lifetime returns can end up with very different outcomes purely because one experienced a market fall in their first retirement years and the other did not; this is a reason to treat any single projected number as a central estimate surrounded by real uncertainty, not a guarantee.

Contribution timing within a career carries more weight than most projections communicate clearly. A dollar contributed in your late twenties has several decades to compound and can end up worth several times a dollar contributed at the same nominal amount in your late forties, purely because of how many compounding periods each one experiences before retirement. This is why the calculator's sensitivity to 'starting five years earlier' scenarios often shows a bigger gap-closing effect than 'contributing 20% more starting today', even though both changes might feel similarly difficult to commit to.

What do worked examples look like?

What do people ask most about this tool?

Which related tools should you try next?