Dave Ramsey Retirement Calculator

The Power of Starting Early

This is the single most important concept in retirement investing. A 25-year-old who invests $500 per month at 10% will have about $3.5 million by age 67. A 35-year-old investing the same amount at the same rate will have about $1.3 million. That extra decade of compound growth is worth over $2 million, and the 25-year-old only contributed $60,000 more in total. Time in the market beats everything.

Dave Ramsey calls this the "wealth snowball." In the early years, most of your balance comes from your contributions. But as the decades pass, the compound growth overtakes your contributions and eventually dwarfs them. By the time you retire, 70-80% of your nest egg is pure investment growth, not money you put in.

The 15% Rule

Ramsey's advice is simple: invest 15% of your gross household income into retirement once you are debt-free and have a full emergency fund (Baby Steps 1-3). At $60,000 income, that is $750 per month. At $80,000, it is $1,000 per month. This percentage is enough to build serious wealth over a 30-40 year career without making you feel strapped on your day-to-day budget.

He recommends not going below 15% but also not going above it until your house is paid off. The extra money above 15% should go toward paying off the mortgage early (Baby Step 6). Once the house is paid off, you can invest even more aggressively.

Where to Put Your Money

Ramsey recommends a specific order. First, contribute to your 401(k) up to the employer match. Free money is free money. Second, max out a Roth IRA ($7,000 in 2025, or $8,000 if you are 50 or older). Third, go back to the 401(k) and increase contributions until you hit 15% of income total. If your employer offers a Roth 401(k), use that instead of the traditional option.

The reason he favors Roth over Traditional is tax-free growth. With a Roth, you pay tax now on the money going in, but everything that comes out in retirement (including all the growth) is completely tax-free. With a Traditional account, you get a tax break now but pay income tax on every dollar you withdraw in retirement. If your money grows 10x over 35 years, the Roth advantage is massive.

The 4% Withdrawal Rule Explained

The 4% rule comes from the Trinity Study, which analyzed stock and bond portfolios over rolling 30-year periods going back to the 1920s. The study found that withdrawing 4% of your initial portfolio value (adjusted for inflation each year) had about a 95% success rate of lasting at least 30 years.

In practical terms: if you retire with $2 million, you can withdraw $80,000 in year one, then increase that amount by inflation (say 3%) each year. Year two would be $82,400, year three $84,872, and so on. Your portfolio continues to grow at 7-10% while you take out 4%, so the math works out in most market conditions.

The 4% rule is not perfect. It was designed for a 30-year retirement. If you retire early at 50, you might want a 3.5% or 3% rate for extra safety. If you retire at 67 and have Social Security, 4% is plenty conservative.

What About Inflation?

Inflation averages about 3-3.5% per year historically. A dollar today will be worth about 50 cents in 20 years. That is why this calculator shows both the nominal value (the actual dollar amount) and the inflation-adjusted value (what that money is worth in today's purchasing power). If you see a projection of $3 million in 35 years, that is equivalent to roughly $1.1 million in today's dollars. Still a great nest egg, but it is important to understand the difference.

Common Mistakes to Avoid

Do not cash out your 401(k) when you change jobs. Roll it into an IRA. Cashing out triggers income tax plus a 10% early withdrawal penalty, and you lose years of compound growth. Do not borrow from your 401(k) for a car, vacation, or anything else. Do not stop contributing during market downturns. Those are actually the best times to invest because you are buying shares at a discount. And do not check your balance every day. Long-term investing requires patience. Check it once a quarter at most.