How the projection works
Your current balance compounds monthly at your expected return while contributions are added each month — the standard future-value calculation. $50,000 today plus $500/month at 7% grows to roughly $970,000 in 30 years, and about 60% of that final number is investment growth rather than money you deposited.
The 4% rule in one paragraph
The Trinity study found that withdrawing 4% of a diversified portfolio in year one, then adjusting for inflation, survived essentially every historical 30-year retirement. Flip it around and you get your target: multiply the annual income you want from savings by 25. Want $60,000/year? Aim for $1.5 million. The rule is a planning benchmark, not a guarantee — many planners use 3.5% for early retirees and adjust spending in bad markets.
What return should you assume?
US stocks have returned ~10% nominal historically, but a diversified portfolio with bonds and after fees is more realistically 6-8%. Planning at 7% and being pleasantly surprised beats planning at 10% and coming up short. Remember these are nominal dollars: at 3% inflation, prices roughly double in 24 years, so consider running the numbers with an inflation-adjusted return (return minus ~3%) to think in today's dollars.
Assumptions worth pressure-testing
A retirement projection is only as good as its inputs, so stress-test the two that matter most. Return: rerun the numbers at 5%, 6%, and 7% — if the plan only works at 9%, it isn't a plan, it's a hope. Contributions: the single biggest lever most people ignore is raising the savings rate by one or two percentage points with every pay raise, which barely dents take-home pay but dramatically shifts the ending balance. Also confirm the horizon is realistic; retiring at 62 instead of 67 removes five of your highest-earning, most-compounding years from the calculation. Small, honest adjustments now beat a heroic catch-up later.