Retirement Income Calculator

A safe withdrawal rate is the percentage of a retirement portfolio you can withdraw each year without running out of money over a given horizon. The widely cited '4% rule' comes from historical research suggesting a 4% initial withdrawal (adjusted for inflation each year) has historically lasted 30 years in most market scenarios. This calculator uses a finite-horizon annuity formula rather than the 4% rule, which accounts for the actual time horizon, expected return, and inflation rate you specify. Results are estimates and should be reviewed with a financial advisor.

A common rule of thumb is to accumulate 25 times your expected annual expenses (the '25x rule', derived from the 4% rule). For example, if you need $60,000 per year, you would target a $1,500,000 portfolio. Social Security and pension income reduce the amount you need to draw from your portfolio, so they directly lower the required savings. The CFPB retirement planning tool at consumerfinance.gov provides additional guidance tailored to your situation.

Social Security benefits are inflation-indexed via annual COLA adjustments and are paid for life regardless of portfolio performance. Treating them as base income is standard financial planning practice: you size your portfolio withdrawals to cover only the gap between your total income needs and your guaranteed income sources (Social Security plus any pension). This reduces the amount at risk in the market and lowers the probability of portfolio depletion.

Sequence-of-returns risk is the danger of poor investment returns in the early years of retirement, which can permanently impair a portfolio even if average long-term returns are fine. If the market falls 30% in your first two retirement years and you are withdrawing funds, you are selling more shares at low prices and have less capital to recover when markets rebound. This calculator uses a single average return rate and does not model sequence-of-returns risk. Conservative return assumptions can partially offset this risk.

Yes. Withdrawals from a Roth IRA are generally tax-free in retirement because contributions were made with after-tax dollars. Converting traditional IRA or 401(k) balances to Roth before retirement (and paying tax on the conversion amount now) can reduce required minimum distributions (RMDs) and lower your tax rate in retirement. The IRS rules on Roth conversions and RMDs are in IRS Publication 590-B, available at irs.gov.

RMDs are mandatory annual withdrawals the IRS requires from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts starting at age 73 (under SECURE 2.0, enacted 2022). The amount is based on your account balance divided by a life-expectancy factor from IRS tables published in Publication 590-B. Roth IRAs are not subject to RMDs during the owner's lifetime. Failing to take an RMD results in a 25% excise tax on the shortfall.