Retirement Income Calculator

How much income do you hope to bring in each month after you retire? Our retirement income calculator can quickly show you how close you are to your goal.

The biggest variable is time – the sooner you begin saving, the longer you will have to build up your balance, and the more money you can withdraw each month in retirement.

But how much you save each month, and the tax rates being applied to your savings and investments, also play big roles, as does inflation. Use the retirement income calculator on this page to see how much money you can expect to withdraw each month once you hit retirement.

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Begin with your current age and the age you plan to retire. Then, look at your current savings and how much you plan to add to them each year. Then, factor in your rate of return, inflation, and how long you expect to live. This retirement income calculator does all this for you.

This depends on your current lifestyle. For example, will you be paying rent or a mortgage in retirement, or have you paid off your house? With a paid off mortgage, your retirement income needs will be lower. Look at how much you’re spending each month now. You can expect to spend somewhat less in retirement probably, but probably not that much. A good gauge is to plan on spending 80% of what you spend now.

Determine retirement income based on how much savings you have in the year you retire. You also need to factor in how long you expect to live based on family history, your expected rate of return for your retirement savings, and your tax rate. The simplest way is to use a retirement income calculator, such as this one, which can do all this math for you.

It depends. If you’re withdrawing from something like a Roth IRA, then that is net income because you will not pay any taxes on the withdrawals. If you’re using a traditional IRA or 401k, it would be gross income because you will pay taxes on your withdrawals.

This depends on your current lifestyle. For example, will you be paying rent or a mortgage in retirement, or have you paid off your house? With a paid off mortgage, your retirement income needs will be lower. Look at how much you’re spending each month now. You can expect to spend somewhat less in retirement probably, but probably not that much. A good gauge is to plan on spending 80% of what you spend now.

There are seven: 1) Social Security, 2) Traditional savings accounts and CDs, 3) Tax-deferred retirement accounts like 401ks and IRAs, 4) After-tax accounts like a Roth IRA, 5) Stocks and mutual funds you have invested independently. This includes company stock options. 6) Real estate investments, and 7) Pensions.

The four primary sources of retirement income come from Social Security, tax-deferred retirement accounts including pensions, your own personal investments and savings, and after-tax retirement accounts such as a Roth IRA.

Your best source of income comes from your own savings and investments. The more of that you have, the less you will have to rely on uncertain government programs like Social Security, and pensions that may or may not turn out to be fully funded when you need them.

According to the US Census Bureau, the median average retirement income is $47,357, for retirees over age 65. Median means half the people bring in more than that, and half bring in less. The mean average is $73,228, because those with very high incomes distort the average. The median is the more useful figure for this reason.

Calculate Your Earnings and More

To calculate your monthly retirement income, as well as how much you can save up between now and when you retire and begin using it to fund your lifestyle, you’ll need a few pieces of information.

First, how much are you setting aside each year? That’s your biggest decision, because the more you set aside, the more you’ll have in retirement. And remember, you can save money in a variety of places, depending on your income situation. You can use an IRA – Roth or traditional. If your company offers it, you can use a 401k. And you can save using many other methods such as stocks, mutual funds, CDs, and traditional savings accounts.

Then, you’ll need to consider your current age, when you plan to retire, your expected rate of return before and after retirement, and the other factors in the retirement income calculator.

You can start using the calculator now, and if you need help, here are the definitions and explanations of the key terms.

Definitions in the Retirement Income Calculator

Let’s go through the definitions of each term used in the calculator.

Starting Balance

How much do you already have saved and set aside for retirement? Remember, this includes any accounts you don’t plan to use until then, including employer retirement contributions and your own retirement savings.

Annual Contributions

How much do you plan to contribute each year? If your employer offers a tax-deferred plan such as a 401k, and you also want to set aside after-tax savings in a Roth IRA or Roth 401k, to make this calculator work for you, you might want to enter those amounts separately and then combine the totals. You’ll see why in a bit.

For example, if you’re contributing $15,000 per year to a 401k, and $6000 per year to a Roth IRA, enter $15,000 in this field. Then, after entering everything else and seeing your retirement income from that account, start over and do it again with the $6000.

Current Age

Enter your current age. This is the simplest part of the calculator.

Age of Retirement

Do you know when you plan to retire? The full retirement age for Social Security depends on how old you are. For some, it’s 65, for others it could be 66 or 67. But you don’t have to go by that. Maybe you want to retire earlier. Maybe you want to keep working. If you’re not sure, just pick an age and see how much retirement income you can expect to have at that time.

This calculator assumes your last contribution will happen before the age you retire. So if you type 65, the last contribution happens when you’re 64.

Years of Retirement

This is the toughest term to fill in because no one knows how long they will live. If you retire at 65 and hope to live to 95, your years of retirement would be 30.

Current Tax Rate

Now we get to the complicated part. What you use here depends greatly on the type of retirement savings method you are using. Remember earlier when we said to separate your tax deferred and after-tax annual contributions. Here’s why that matters.

If you’re stashing money in a tax-deferred account such as a 401k, your current tax rate will be zero. That’s because that money is growing tax free. When you withdraw it in retirement, you will have to pay taxes on it then, but for now, there are no taxes. The same holds true if you’re using a Roth IRA or Roth 401k. That money grows tax free.

On the other hand, if you’re saving using stocks, mutual funds, CDs, or things of that sort, you are paying capital gains and/or income tax every year on your earnings, and you need to enter your annual tax rate based on your tax bracket. Use this table to get an estimate of your tax rate:

[Insert Filing Status and Federal Income Tax Rates on Taxable Income for 2022 table]

Retirement Tax Rate

Here, what you entered in the current tax rate may remain the same, or it may change. If you’re using a Roth IRA, you would enter zero here again, because Roth IRA accounts do not have to pay any taxes on your earnings. This is again the reason to use the retirement income calculator more than once, for each type of account.

If you’re using a tax-deferred account, while it grew each year with no taxes, once you retire you will have to pay taxes on your withdrawals, and that amount will depend on your total income each year. Again, the tax brackets in the table will be helpful.

Expected Inflation Rate

This is another item no one can know for sure, but over long periods of time, inflation tends to average about 2.9% per year. That’s a good figure to go with here.

To Increase Deposits with Inflation Checkbox

If you intend to increase your annual contributions each year by the rate of inflation, check this box. Just remember that you will have to do the math each year to figure out how much that will be.

If Savings Is Tax Deferred Checkbox

If you’re using a 401k, traditional IRA, or some other tax-deferred retirement account, check this box.

However, if you’re using a Roth IRA or Roth 401k, you would not check this box, and you would enter zero for both the current tax rate and the retirement tax rate.

Rate of Return Before Retirement

For this field and for the rate of return during retirement, there is no way to know for sure what you will earn. Historical averages can give you a clue, but there is no guarantee that the rate of return when you retire will be anywhere close to that historical average.

So, you kind of have to just guess here. If you’re making more conservative investments such as CDs, you’d put a lower return here like 2-3%. Though that’s lower than you could earn with stocks, it also comes with no risk of loss. If you intend to use mutual funds and stocks, you can go with anything from 5-15%, depending on how aggressive and successful you expect to be.

There is a separate field for rate of return during retirement because at that point, you may decide to reduce your risk of loss since you now depend on this money for retirement income. That will result in a lower rate of return, but also a more reliable one.

Now you know enough to start using the retirement income calculator. Play around with it and see how much you need to start saving each year to reach your retirement income goals.

Also, bear in mind that this calculator doesn’t include other sources of retirement income such as Social Security and pensions.

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Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

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