Are you on track for retirement?

"On track" is a comparison, so it needs something to compare against. Building that something takes four inputs, and the reason this question feels unanswerable is that most people have never written down more than two of them.

The four numbers

1. What you will spend each year in retirement. Not your income — your spending. Start from what you spend now, then subtract what stops (commuting, the mortgage if it is gone, retirement contributions themselves) and add what starts (healthcare, and more of whatever you do with free time).
2. What arrives without you. Social Security, a pension, an annuity, rental income. This directly reduces what the portfolio has to produce.
3. The gap. Annual spending minus guaranteed income. This is the number the portfolio exists to cover.
4. How long it has to last. Which is a question about life expectancy, and the honest planning answer is longer than the average, because the risk is asymmetric — running out is much worse than leaving something behind.

Multiply the gap by roughly 25 and you have a rough target. That multiplier is the inverse of the 4% rule, and it is a starting point rather than a law.

The 4% rule, stated properly

The widely quoted version is "withdraw 4% of the portfolio in year one, then adjust that dollar amount for inflation each year". Note what it is not: it is not 4% of the balance each year. The dollar figure is set once and then indexed.

It came from studies of historical US returns over 30-year retirements. It is a reasonable planning anchor and it is routinely over-claimed. Things that make it optimistic: long retirements, high fees, a bad first decade. Things that make it conservative: flexibility about spending, guaranteed income covering the essentials, a willingness to cut back in bad years.

Treat it as an order-of-magnitude check, not a withdrawal policy.

The retirement calculator runs the accumulation and the drawdown as one simulation, so the "nest egg needed" figure and the balance path are the same model rather than two estimates that happen to sit on the same page.

The assumptions that move the answer most

Inflation. Over a 30-year retirement, 3% inflation roughly halves what a fixed dollar buys. Any projection that does not inflate the spending target is producing a number that looks sufficient and is not. Social Security is indexed; most pensions are not, and an unindexed pension is worth much less at 85 than at 65.

The return assumption. Covered in what your investments will be worth — the spread between a 5% and a 9% assumption roughly doubles the projected balance, and nobody knows which is right.

Sequence risk. Averages hide the order returns arrive in. A bad first decade while you are drawing an income is materially worse than the same decade later, because selling into a fall realizes the loss permanently. This is the argument for holding a few years of spending outside equities as you approach the date.

When you claim Social Security. Claiming later increases the monthly benefit permanently, and it is one of the few genuinely guaranteed, inflation-indexed increases available. It deserves its own analysis rather than a default.

What usually is not counted, and probably should not be

Your home. It is likely your largest asset and it produces no income. It counts toward net worth, not toward retirement income, unless you have a concrete plan to sell and downsize — in which case count the difference between the sale proceeds and the next place, not the whole value.

If you do sell, the gain on a main home can be excluded from income within limits, which is covered in the guide on renting versus buying.

What to do with this

1. Write down annual spending, properly. Everything downstream depends on it, and guessing here makes the rest decorative.
2. Get your actual Social Security estimate from your own statement rather than a rule of thumb.
3. Run the projection in today's dollars so the target and the balance are comparable.
4. Run it three times — pessimistic, central, optimistic. If it only works in the optimistic case, you have found something out.
5. Check the contribution first. It is the input you control. Return assumptions are not a lever, however easy they are to type.
6. Re-run it every year. "On track" is a moving assessment, and the useful version is the one you update.

Being behind is common and it is fixable. Being behind without knowing by how much is the position worth getting out of, and that only takes an afternoon with the four numbers.

Sources: the 4% withdrawal rule originates with William Bengen, "Determining Withdrawal Rates Using Historical Data", Journal of Financial Planning (1994), and the subsequent Trinity study; it is a planning anchor derived from historical US returns, not a guarantee. Return assumptions used in the calculator are read from the same constants documented in the guide on what your investments will be worth.