The formula
How to calculate retirement nest egg
This sizes a pot that is meant to be spent, not preserved. Unlike the 25× FIRE number, which assumes the portfolio lasts forever, this runs the balance down to nothing over a defined number of years.
It is the present value of an annuity, computed with a real return so the spending figure stays in today's money and rises with inflation automatically.
Here is what each field means:
- Annual spending
- Years in retirement (years)
- Real return (%)
Everything recalculates as you type, and the numbers in the address bar update with it, so a link to this page carries your figures with it.
Worked example
Here is the calculation with the starting values:
- Annual spending: 36,000
- Years in retirement: 30 years
- Real return: 3.5 %
That gives:
- Nest egg required: 662,113.63
- Required with no growth at all: 1,080,000
- Saved by investing rather than holding cash: 417,886.37
Reading the result
Depletion is materially cheaper than perpetuity. Thirty years of £36,000 needs around £662,000 at a 3.5% real return, where the perpetual version at a 4% withdrawal rate needs £900,000 — the difference is what leaving an estate costs.
Where this goes wrong. Choosing the number of years by guesswork. A 65-year-old today has a meaningful chance of reaching 95, and a plan built for exactly 30 years leaves nothing if that happens. Add a margin, or keep a guaranteed income to fall back on.
Use this one if you are comfortable spending the capital and have a defined horizon, typically retiring at a conventional age. Use the FIRE number if you are retiring early, want to leave an estate, or dislike the idea of a plan that ends at zero.
Retirement portfolios usually hold more bonds, so 2.5–3.5% after inflation is a reasonable planning range. Assuming an equity-like real return while holding a defensive portfolio is the mistake that quietly undersizes the pot.
It returns nest egg required. With 36,000 annual spending, 30 years years in retirement and 3.5 % real return, that comes to 662,113.63. Change any field and the figure moves with it.