What a pension projection is actually telling you

A pension projection is one long division problem wearing a suit. It takes what you spend now, inflates it to the year you stop working, multiplies it by the number of years you expect to live after that, and subtracts whatever the state is going to pay you. Everything else is arithmetic.

Which means the output is only ever as good as four inputs, and one of them dominates. Change your assumed retirement age by five years and the required pot moves more than almost any contribution decision you will make this decade.

Common questions

Why does the number look so much bigger than my salary?

Because it is funding two or three decades of spending in one figure, in future money rather than today's. A pot of one million dollars supporting thirty years of retirement is about thirty three thousand a year before any state pension, which is a normal income rather than a fortune. Inflation is doing most of the work in making the headline look frightening.

Should I count the state pension?

Yes, but conservatively. It is a real income stream and ignoring it inflates your target badly, often by a third or more. The honest approach is to include it at today's value rather than assuming it rises with your salary, and to check the projection again if the rules change.

What inflation rate should I use?

Between two and three percent is the usual planning range for the US and it matches the Federal Reserve's own target. The number matters less than being consistent about it, because using a real return in one place and a nominal one in another is the single most common way these projections go wrong by a factor of two.

How much difference does retiring five years later make?

More than almost anything else on the page. Working five extra years adds five years of contributions, adds five years of compounding on the whole pot, and removes five years of withdrawals from the other end. That triple effect is why the retirement age input moves the answer further than a realistic change to your monthly contribution ever will.

Is this the same as a retirement number?

Close, but framed differently. A retirement number asks what pot you need. A pension projection asks whether the contributions you are actually making get you there, and shows the gap if they do not. Use the retirement number calculator to set the target and this one to check the plan against it.

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