Retirement Formula Explained

This reference explains the Retirement formula used by our free Retirement Calculator. Use it to understand variables, units, and common mistakes before you calculate.

The formula

Retirement Calculator formula

Variables and units

• FV — Future value of retirement savings ($)
• PMT — Monthly contribution ($)
• r — Expected annual return (decimal)
• n — Years until retirement (years)

Worked example

Inputs: $50,000 current savings, $500/month contribution, 7% return, 25 years

1. Existing savings grow: 50,000 × (1.07)^25 ≈ $271,372
2. Contributions grow with annuity formula ≈ $405,000
3. Total ≈ $676,000 at retirement

Result: Estimated nest egg ≈ $676,000

When to use this formula

Use this formula when you need a quick retirement estimate with values you already know. Our Retirement Calculator applies the same relationship automatically so you can verify handwritten work.

Common mistakes

• Using overly optimistic return assumptions (10%+ long-term)
• Ignoring inflation when planning withdrawal amounts
• Forgetting employer 401(k) match in contribution calculations

Frequently asked questions