The 12% and 8% assumptions
Both are contested. The S&P 500's long-run nominal return is closer to 10% before fees and roughly 7% after inflation, and the Trinity-study-derived safe withdrawal rate is about 4%, not 8%. An 8% withdrawal from a portfolio returning 8% nominal leaves nothing for inflation, so the real income falls every year. The calculator shows both so the gap is visible instead of buried.
Why 15% and not more
The 15% figure assumes you are debt-free apart from the mortgage and that Baby Steps 5 and 6 — college funding and paying the house off early — take the remaining surplus. If you are starting late, 15% is not enough; the late-starter preset shows what a realistic catch-up rate looks like.
Order of accounts
Match first if your employer offers one — that is an immediate return no market assumption can match. Then Roth IRA up to the limit, then back to the 401(k) until you hit 15%. High earners phased out of a Roth IRA can use the backdoor route or a Roth 401(k) where offered.
What the model cannot see
Social Security, pensions, home equity, inheritance, part-time income in early retirement, and the fact that spending typically falls in later retirement. These usually work in your favour — which is another reason to plan on the conservative column and be pleasantly surprised.
FAQ
How much do I need to retire according to Dave Ramsey?
Ramsey works backwards from the income you want: at his 8% withdrawal rate, a $60,000 retirement income implies a $750,000 nest egg. At the mainstream 4% rate the same income needs $1.5M. The calculator shows both figures for your inputs.
Is Dave Ramsey's 12% return accurate?
It is optimistic. The S&P 500's long-run nominal average is nearer 10% before fees, and roughly 7% after inflation. Using 12% can understate what you need to save by a wide margin over 30 years, which is why the 8% column is shown alongside.
Is an 8% withdrawal rate safe?
Most retirement researchers say no. The widely cited safe rate is about 4% of the starting balance, adjusted for inflation. An 8% draw has a meaningful chance of exhausting the portfolio across a 30-year retirement, particularly if the early years see poor returns.
What is Baby Step 4?
Investing 15% of gross household income for retirement, started after you are debt-free except the mortgage and hold a fully funded 3–6 month emergency fund.
How this calculator is built
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Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
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