Retirement Income Calculator: Will Your Savings Last?

Rachel had $850,000 in retirement accounts when she turned 62. She'd read somewhere that she needed $1 million to retire, so she figured she was almost there. Just a few more years of saving and she'd be set.

Then she did the actual math.

Her expected Social Security at 67: $2,100 per month, or $25,200 per year. Sustainable withdrawals from her $850,000 at 4%: $34,000 per year. Total income: $59,200.

Her current expenses: $72,000 per year.

Rachel wasn't almost ready to retire. She was $12,800 per year short — and that gap would compound over a 30-year retirement. Either she needed to save more, spend less, or work longer. Probably some combination of all three.

"I thought I was doing well," Rachel said. "I had no idea how the pieces actually fit together until I ran the numbers."

This is why retirement income calculation matters more than simple savings totals. A million dollars sounds impressive, but it might generate only $40,000 per year sustainably. Meanwhile, someone with $600,000 plus a pension and maximized Social Security might have more actual income.

The question isn't how much you have. It's how much you can spend.

The income sources that fund retirement

Most retirees piece together income from multiple sources, each with different characteristics and tax treatment.

Social Security forms the foundation for most Americans. Your benefit depends on your 35 highest-earning years, adjusted for inflation, and the age at which you claim. Claiming at 62 gives you the smallest monthly check; waiting until 70 gives you the largest — roughly 76% more than the age-62 amount. For married couples, coordination gets more complex: spousal benefits, survivor benefits, and claiming strategies can add tens of thousands to lifetime income.

Pensions have become rare but still exist for government employees, teachers, and some private-sector retirees. A pension provides guaranteed income for life — valuable certainty that portfolio withdrawals can't match. Some pensions include cost-of-living adjustments; others are fixed, which means inflation erodes their purchasing power over time.

Retirement account withdrawals — from 401(k)s, IRAs, and similar accounts — make up the difference between guaranteed income and spending needs. The sustainable withdrawal rate is typically 3-4% of your portfolio annually, adjusted for inflation. Higher rates risk running out of money; lower rates leave money on the table. Traditional accounts are taxed as ordinary income. Roth withdrawals are tax-free.

Taxable investment income includes dividends, interest, and capital gains from non-retirement accounts. This income doesn't have the withdrawal restrictions of retirement accounts, but it's subject to annual taxes whether you need the money or not.

Other sources round out the picture: part-time work, rental income, business income, annuities, inheritance. Each adds to the total but comes with different reliability and tax treatment.

The sustainability question

Having $1 million doesn't mean you can spend $100,000 per year. The classic 4% rule suggests withdrawing 4% of your portfolio in year one, then adjusting for inflation annually. For a $1 million portfolio, that's $40,000 the first year, maybe $41,200 the second year (with 3% inflation), and so on.

The rule was designed for 30-year retirements and historically succeeded about 95% of the time in simulations. But it has limitations that matter.

Taxes aren't accounted for. If your $40,000 comes from a Traditional IRA, you might net only $32,000 after federal and state taxes. Your actual spendable income is less than the withdrawal.

Sequence of returns matters enormously. A market crash early in retirement is far more damaging than one late in retirement, even if average returns are identical. Withdrawing from a declining portfolio depletes capital faster, leaving less to recover when markets improve.

Flexibility isn't built in. The rule assumes you withdraw the same inflation-adjusted amount regardless of what markets do. In reality, most retirees can and should adjust spending based on portfolio performance.

For early retirees facing 40 or 50-year retirements, even 4% may be aggressive. A 3% or 3.5% withdrawal rate provides more safety over longer time horizons.

The expense side of the equation

Income matters only in relation to what you need to spend. Most retirees spend 70-80% of their pre-retirement income, but this varies dramatically based on circumstances.

Housing often decreases if the mortgage is paid off, but property taxes, insurance, and maintenance continue. Downsizing saves money; aging in place might require expensive modifications.

Healthcare typically increases, sometimes dramatically. Before Medicare at 65, premiums can run $500-1,500 per month per person. After Medicare, you'll still pay premiums, deductibles, and uncovered expenses. Long-term care — the wildcard — can cost $8,000-12,000 per month.

Transportation often decreases without commuting, but maintaining vehicles continues. Eventually, many retirees need to fund rides or relocate to more accessible living situations.

Discretionary spending varies by phase. Early retirement often sees higher travel and leisure spending — the "go-go years." Later retirement shifts toward healthcare and simpler living — the "slow-go" and "no-go" years.

Rachel's $72,000 in expenses included a mortgage payment that would disappear in eight years. Her sustainable retirement budget might actually be $60,000 — still more than her projected income, but a smaller gap to close.

The gap analysis

When projected income falls short of projected expenses, something has to change.

Working longer addresses the gap from multiple angles simultaneously. You add years of saving and investment growth. You subtract years of withdrawals. You potentially delay Social Security for higher benefits. You maintain employer health insurance longer. One additional year of work can extend how long your money lasts by several years.

Reducing expenses is mathematically powerful. Every dollar cut from annual spending not only reduces what you need in year one — it reduces your target for all 30 years. Cutting $5,000 per year from expenses is equivalent to having $125,000 more in savings (at a 4% withdrawal rate).

Optimizing Social Security timing can add tens of thousands to lifetime income. Delaying from 62 to 70 increases your benefit by roughly 76%. For many retirees, especially those in good health, the break-even math strongly favors waiting.

Part-time work in retirement provides income without fully depleting the retirement you've earned. Even $20,000 per year from part-time work reduces portfolio withdrawals by $20,000 — the equivalent of having an extra $500,000 in savings.

What our calculator will show you

When our Retirement Income Calculator launches, you'll be able to input all your income sources and see them combined into total annual income. You'll enter your expected expenses and see whether they exceed or fall short of your income. The gap analysis will show exactly how much you're over or under — and what changes would close that gap.

Year-by-year projections will show how your income and expenses change over time. Social Security might start at 67. RMDs kick in at 73. Medicare begins at 65. The calculator will layer these timing elements and show you cash flow at every age.

Tax estimates will show what you'll actually keep after federal and state taxes, helping you understand the difference between gross income and spendable income.

Scenario modeling will let you compare different approaches: What if I work two more years? What if I delay Social Security? What if I downsize my house? Each scenario shows the long-term impact on your financial security.

Sign up to be notified when the calculator launches →

Preparing for the calculation

Before using our calculator (or any retirement income tool), gather your information.

For Social Security, create an account at ssa.gov and download your statement showing projected benefits at 62, 67, and 70. Note your spouse's benefits too if married.

For retirement accounts, list all 401(k)s, IRAs, Roth accounts, and other retirement savings with current balances. Don't forget old accounts from previous employers.

For pensions, document the monthly amount, whether it adjusts for inflation, survivor benefit options, and the earliest start date.

For expenses, track your actual spending for at least three months. Most people underestimate expenses when guessing but get accurate numbers when tracking.

The more precise your inputs, the more useful your output. Rachel's realization came from running real numbers, not from vague estimates. That clarity — uncomfortable as it was — gave her the information she needed to make real decisions about her retirement timing.

Need personalized retirement income planning? Connect with a retirement advisor who can create a comprehensive income strategy for your specific situation.