Retirement Income Calculator

How to use this calculator

Enter your portfolio size, annual expenses, expected annual return, retirement horizon, Social Security income, and any other income sources (pension, rental income, part-time work). The calculator shows total income coverage, projected portfolio survival, and your withdrawal rate.

Annual Expenses should be in today’s dollars at retirement. If you’re still working, estimate what you’ll actually spend when you stop. Many people spend more in early retirement on travel and activities, less in later years.

Social Security is entered as annual income. Use the SSA’s online calculator to get your actual projected benefit. For married couples, enter the total for both spouses if both are claiming.

The results show how much of your expenses are covered by non-portfolio income (your coverage rate), how much the portfolio needs to contribute, and a year-by-year projection of portfolio value.

Your income sources in retirement

A complete retirement income picture combines multiple streams. Most people rely primarily on the portfolio, but other sources can change the math dramatically.

Portfolio withdrawals. At 4% withdrawal rate, $1M generates $40,000 per year. The relevant question is whether to use a fixed dollar withdrawal (adjusted for inflation each year) or a fixed percentage (always 4% of current balance). Fixed dollar provides predictable income. Fixed percentage is more portfolio-safe because withdrawals automatically shrink when the portfolio drops.

Social Security. Benefits can range from $15,000 to $60,000 or more per year per person depending on earnings history and claiming age. A couple with both spouses maximizing Social Security at 70 can generate $60,000 to $120,000 per year in guaranteed inflation-adjusted income. This is the most undervalued retirement asset most people have.

Pension. Increasingly rare in the private sector but common for teachers, government employees, and military. A $3,000 per month pension is equivalent to owning $900,000 in additional portfolio at a 4% withdrawal rate. If you have a pension, count its portfolio equivalent when assessing your retirement readiness.

Rental income. A paid-off rental property generating $20,000 per year net replaces $500,000 in required portfolio. Rental income also tends to keep pace with inflation, which makes it valuable as a hedge against purchasing power erosion.

Annuities. A $200,000 single-premium immediate annuity at 65 currently generates approximately $1,000 to $1,200 per month for life. You give up liquidity and potential upside, but you eliminate longevity risk for that portion of assets.

The coverage rate

The coverage rate measures what percentage of your expenses comes from guaranteed or semi-guaranteed sources rather than volatile portfolio withdrawals.

For FIRE retirees in early retirement (before Social Security and Medicare), coverage rates are often 20% to 40%. This means careful portfolio management is essential. The lower the coverage rate, the more important flexible spending and a cash buffer become.

Building toward a higher coverage rate over time is one of the most reliable ways to improve retirement security without necessarily saving more. Waiting to claim Social Security until 70 can increase coverage rate by 20 to 40 percentage points for many couples.

How inflation erodes fixed income

Retirement income must grow over time. A plan that works at 65 may be insufficient at 80 if inflation consistently outpaces income growth.

At 3% annual inflation, $80,000 per year in expenses becomes:

Portfolio withdrawals adjusted for inflation handle this. Social Security is fully indexed to CPI. Pensions vary: some are fixed in nominal terms and some include COLA provisions.

The most dangerous income source for long-term purchasing power is a fixed pension with no COLA. $3,000 per month at 65 becomes $1,488 per month in real terms at 85 at 3.5% annual inflation. If you have a fixed pension, plan explicitly for this erosion. You’ll need other income sources to grow over time to compensate.

Sequence of returns and withdrawal timing

A $1M portfolio dropping 40% in year one of retirement leaves $600,000. If you withdraw $40,000 that year, you have $560,000. Getting back to $1M from $560,000 requires a 79% return, which at 7% per year takes nearly 9 years. You’ve spent those 9 years withdrawing while the portfolio is impaired.

Three mitigation strategies that work:

Cash buffer. Keep 1 to 2 years of expenses in cash or short-term bonds. In a market crash, draw from cash and leave equities alone. Selling stocks at the bottom is the primary mechanism through which sequence risk destroys portfolios.

Flexible spending. Categorize expenses into essential and discretionary. In bad market years, cut discretionary. This reduces withdrawal pressure exactly when it matters most. A retiree who can cut from $75,000 to $60,000 in a bad market year significantly reduces the damage from poor sequencing.

Part-time work in early retirement. Even $15,000 per year from occasional consulting eliminates portfolio withdrawals in bad years entirely. This is probably the highest-leverage risk mitigation available to early retirees.

When to claim Social Security

Social Security claiming strategy is worth $100,000 to $200,000 or more in lifetime income for the average couple, and most people get it wrong.

Claim at 62: Reduces benefit by 30% compared to full retirement age. Makes sense only with serious health issues or a genuine need for current income.

Claim at full retirement age (66 to 67): Full benefit. Reasonable if you need the income and don’t expect to live significantly past 79 or 80.

Claim at 70: Benefits grow 8% per year from full retirement age to 70. Every year you delay from FRA to 70 is a guaranteed 8% return, which is better than most fixed-income investments available to ordinary investors. Each month of delay adds to the benefit permanently.

The break-even point for delaying from 62 to 70 is roughly age 79 to 80. Any healthy 62-year-old has better than even odds of living past 80. The math strongly favors waiting.

For married couples: the lower-earning spouse claims early for current income, the higher-earning spouse delays to 70. When the higher earner dies, the surviving spouse inherits the larger benefit. Optimizing the survivor benefit is often worth more than the total break-even analysis suggests for either spouse individually.

Tax-efficient withdrawal order

The sequence in which you draw from different accounts affects your tax bill significantly.

The conventional order (often wrong):

1. Taxable accounts first (minimize deferred tax growth)
2. Tax-deferred (traditional IRA, 401k) second
3. Roth last (maximize tax-free growth)

The better approach for early retirees:

Between retirement and Social Security eligibility (often age 40 to 62), income is often low. This window is ideal for Roth conversions at 10% to 22% tax rates. Converting traditional IRA money to Roth during these low-income years is a permanent tax reduction, since future Roth withdrawals are tax-free.

A rough sequence for an early retiree:

• Ages 40 to 62: Draw from taxable accounts; do Roth conversions to fill 12% or 22% bracket
• Ages 62 to 70: Continue conversions; consider starting Social Security based on income needs
• Ages 70+: Social Security and RMDs begin; adjust withdrawal mix to manage taxable income

The goal is to fill lower tax brackets deliberately rather than letting required minimum distributions force large taxable distributions in your 70s and 80s.

Estimating income you can rely on

Not all income sources are equally reliable:

Plan your essential expenses around the high-reliability sources. Discretionary spending can lean on the portfolio and variable income. This ensures that even in a poor sequence of returns, your basic needs are covered from sources that don’t depend on market performance.

Healthcare planning in retirement income

For Americans, healthcare costs between 45 and 65 deserve their own line in your retirement income model.

An unsubsidized ACA plan for a 50-year-old couple runs $2,000 to $3,500 per month in premiums. At $30,000 per year in healthcare premiums, plus potential deductibles and out-of-pocket costs of $5,000 to $15,000 in a bad year, total healthcare spending can reach $35,000 to $45,000 annually.

At 4% withdrawal, $40,000 per year in healthcare costs requires $1M in portfolio just for that line item. This is one reason FIRE retirees who retire before Medicare eligibility at 65 often maintain some form of part-time work, specifically to maintain employer health coverage.

The ACA subsidy structure helps those with managed income. If modified adjusted gross income stays below 400% of FPL (about $120,000 for a couple in 2025), premium subsidies are significant. At 150% to 200% FPL, a couple in their late 40s can qualify for Silver plans with $0 to $100 per month net premiums after subsidies.

Managing MAGI in retirement: use Roth conversions and capital gains realizations deliberately to hit the right income band. This requires annual planning but the savings are substantial.

Putting it all together: a retirement income model

Building a complete retirement income model means accounting for every source, timing, and the tax impact of each.

Here’s what a complete model looks like for a couple retiring at 55 with $1.8M in investments, targeting $85,000 per year in today’s dollars:

Ages 55 to 62 (no Social Security yet):

• Portfolio withdrawal: $85,000 per year (4.7% of $1.8M — slightly high, but manageable)
• Part-time consulting income: $20,000 per year reduces effective withdrawal to $65,000 (3.6%)
• Roth conversions: $15,000 per year to build tax-free pool
• Healthcare: ACA plan with managed MAGI; premiums $200/month

Ages 62 to 70:

• Lower-earning spouse claims Social Security at 62: $18,000 per year
• Portfolio withdrawal drops to $67,000 per year
• Part-time work reduced or eliminated
• Effective withdrawal rate: 3.7% on original balance (portfolio has grown)

Ages 70+:

• Higher-earning spouse claims Social Security at 70: $38,000 per year
• Combined Social Security: $56,000 per year
• Portfolio only needs to cover $29,000 per year
• Withdrawal rate on original portfolio: 1.6%
• RMDs begin; Roth conversions done in prior years reduce taxable RMD amount

This timeline shows how retirement income gets easier over time, not harder, when Social Security is timed well and Roth conversions are used during the low-income bridge years. The highest stress period is the first 7 years before Social Security. Plan the most carefully for that window.