Retirement Planning, Explained

Retirement planning sounds complicated, but almost all of it comes down to two questions: how big a pile of money do you need, and will it last? This guide walks through the accounts, the trade-offs and the rules of thumb behind every BedrockCalc retirement calculator, in plain English.

The shape of retirement: build it up, then draw it down

Every retirement plan has two phases, and they run on opposite logic.

• Accumulation — your working years, when contributions plus compound growth build the nest egg. Time is your biggest asset here.
• Drawdown — your retired years, when you spend the pile down while what’s left keeps growing. Now the risk is running out too soon.
• The pivot point is your retirement date, where the goal flips from “grow the balance” to “make it last.”
• Because it can span 30-plus years, plan in real (inflation-adjusted) returns: real return = (1 + r) / (1 + inflation) − 1. A 7% return with 3% inflation is really about 3.9% of purchasing power.

The Retirement calculator models both phases at once — the nest egg at your retirement age, the income it supports, and the age your savings would deplete.

Your 401(k) and the employer match: don’t leave free money

A 401(k) is a workplace retirement account funded straight from your paycheck. The headline feature is the employer match.

• Many employers match a percentage of what you put in — a common formula is 50% of your contributions up to 6% of salary.
• That match is an instant, guaranteed return on your money before markets do anything. Nothing else in investing reliably pays like it.
• Contributions are often pre-tax, lowering this year’s taxable income; the balance grows tax-deferred until you withdraw it.
• Annual contribution limits are set by the IRS and change most years — check the current IRS limit rather than relying on an old number.

Worked example — the cost of skipping a 50% match. Say you earn $60,000 and your employer matches 50% up to 6% of pay. Contributing 6% ($3,600) earns you a free $1,800 every year. Skip it, and over 30 years those missed matches — invested at 7% — would have grown to roughly $180,000. That is money you simply gave up.

Roth vs Traditional: pay tax now or pay tax later

This is the single most common retirement question, and it has a clean framing.

• Traditional — contribute pre-tax, get the deduction now, then pay income tax on every withdrawal in retirement. Tax later.
• Roth — contribute after-tax dollars now; qualified withdrawals in retirement (contributions and growth) come out tax-free. Tax now.
• The deciding factor is your tax rate now vs. in retirement:
  • Expect a lower rate later? Traditional tends to win.
  • Expect a higher rate later (or you’re early-career with room to grow)? Roth tends to win.
• Roth also has no required withdrawals during your lifetime and gives valuable tax diversification — a bucket the IRS can’t touch again.
• BedrockCalc’s Roth IRA tool asks for your own marginal tax rate rather than guessing brackets, so the comparison reflects your situation.

IRAs: your own retirement account

An IRA (Individual Retirement Arrangement) is a retirement account you open yourself, separate from any employer.

• It comes in the same two flavors: Traditional (tax-deferred) and Roth (tax-free growth).
• Contribution limits are lower than a 401(k)’s and, again, are set annually by the IRS.
• A common strategy: capture the full 401(k) match first (free money), then fund an IRA for its wider investment choices, then return to the 401(k) for the rest.
• The IRA and 401(k) calculators both show contributions vs. growth so you can see how much of the final balance is compounding rather than your own deposits.

The 4% rule: how long will savings last?

Once you retire, the key question is how much you can spend each year without running dry.

• The 4% rule says withdrawing about 4% of your starting balance in year one, then adjusting for inflation, has historically lasted ~30 years.
• Flip it around and you get your target: nest egg = annual spending / withdrawal rate. At a 4% rate, that’s 25× your annual spending.
• Example: wanting $40,000/year implies a nest egg of 40,000 / 0.04 = $1,000,000.
• The 4% figure is a guideline, not a guarantee — market crashes early in retirement, longer lifespans, or higher spending can shorten how long money lasts.
• A more conservative 3.5% withdrawal rate buys extra safety at the cost of needing a bigger pile (about 28.5×).

Social Security: when to claim

Social Security pays a monthly benefit for life, and when you start it changes the size of every check.

• Your full retirement age (FRA) is 66–67 depending on birth year; claiming at FRA gives 100% of your calculated benefit.
• Claim early (from 62) and each check is permanently reduced.
• Delay past FRA and benefits grow roughly 8% per year up to age 70 — then stop growing, so there’s no reason to wait beyond 70.
• The trade-off is a break-even age: claim early and you get smaller checks sooner; delay and you get bigger checks but fewer of them. Whether delaying pays off depends on how long you live.
• Rough intuition: break-even for delaying often lands in the late 70s to early 80s — delaying tends to reward those with longer life expectancy.
• The Social Security calculator uses your estimated benefit (PIA) and shows the claiming-age break-even so you can weigh it yourself.

Pensions: lump sum vs. monthly annuity

If you’re lucky enough to have a pension, you may be offered a choice: a big one-time lump sum, or a guaranteed monthly payment for life.

• To compare them fairly, find the present value of the monthly stream: PV = payment × (1 − (1 + r)^−n) / r.
• If the offered lump sum is larger than that present value, the lump sum is mathematically the better deal — and vice versa.
• Monthly payments favor those who value guaranteed lifetime income and expect to live long; a lump sum favors those who want control, flexibility, or to leave an inheritance.
• The Pension calculator runs this present-value comparison and shows a break-even age.

Annuities: accumulation and payout

An annuity is an insurance product that can grow money, then pay it back out — mirroring the two phases of retirement itself.

• Accumulation phase — you pay in and the balance grows: FV = PMT × ((1 + r)^n − 1) / r. The Annuity calculator models this build-up.
• Payout phase — the balance converts into steady income: PMT = PV × r / (1 − (1 + r)^−n). The Annuity Payout calculator solves for the sustainable monthly check and shows when principal runs out.
• Annuities trade upside and liquidity for predictability — worth it for some, too rigid for others.

FIRE: the 25× number

FIRE (Financial Independence, Retire Early) is just the 4% rule aimed at an earlier finish line.

• Your FI number = annual spending / withdrawal rate — at 4%, that’s the familiar 25× annual expenses.
• Two levers decide how fast you get there: your savings rate and your real return. A high savings rate shortens the timeline dramatically because it both grows the pile and shrinks the number you need.
• Variants exist: Coast FIRE (save enough early that growth alone carries you to retirement) and Lean/Fat FIRE (smaller or larger target lifestyles).
• The FIRE calculator lets you adjust the withdrawal rate — you’re not locked to 4% — and estimates years to independence from your savings rate.

The HSA: a stealth retirement account

A Health Savings Account (available with a high-deductible health plan) is the only account with a triple tax advantage, which makes it a quietly powerful retirement tool.

• Pre-tax in — contributions lower your taxable income.
• Tax-free growth — invested balances compound with no tax drag.
• Tax-free out — withdrawals for qualified medical expenses are never taxed.
• The strategy: pay small medical bills out of pocket, invest the HSA and let it grow for the large healthcare costs that typically arrive in retirement.
• Contribution limits are set by the IRS and change yearly — check the current figures.
• The HSA Growth calculator shows the difference between spending the account each year and investing it for the long haul.

Putting it together

A workable order for most people: capture the full employer match first, build tax diversification across Roth and Traditional, consider the HSA as a long-term investment account, and size the whole thing against the 25× rule. Then plan the drawdown so the pile lasts.

The specific numbers — contribution limits, Social Security factors, tax brackets — change every year, so always confirm current figures with the IRS or SSA. Nothing here is personalized financial advice; the calculators are here to help you run your own numbers.