Retirement Income Calculator
Model pension, Social Security, and portfolio withdrawals year by year
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What This Calculator Models
Most retirement calculators ask: “How long will my money last if I withdraw X%?” This calculator asks a different question: “What withdrawal rate do I actually need each year, after my guaranteed income sources kick in?”
The distinction matters. If you have a pension and Social Security covering most of your spending, your portfolio withdrawal rate may be 3–4% in the early years and drop to near 0% once all income streams are active. That’s a fundamentally different risk profile than a retiree with no guaranteed income drawing 4% from day one.
Enter your portfolio, pension details, and Social Security information to get a year-by-year projection showing exactly how much your portfolio needs to contribute each year — and whether your plan holds up to your target age.
How the Calculation Works
Working in Real (Inflation-Adjusted) Terms
All values are shown in today’s purchasing power. This means:
- Your spending target stays constant — if you enter $145,000, that represents $145,000 worth of today’s purchasing power every year
- The real portfolio return adjusts for inflation: real return = (1 + ROI) / (1 + inflation) − 1
- Social Security is assumed to track inflation (constant in real terms)
- Pension erodes in real terms if COLA is below inflation
For example, a pension with 1% COLA and 3% inflation loses about 2% of its purchasing power per year. After 20 years, a $70,000 pension is worth roughly $47,000 in today’s dollars.
Year-by-Year Simulation
For each year from current age to your target age:
Accumulation phase (before retirement age): portfolio grows at the real return rate plus annual contributions.
Distribution phase (from retirement age onward):
- Calculate pension income in real terms (adjusted for COLA vs inflation each year)
- Add Social Security benefits once each person reaches their claiming age
- Required withdrawal = spending target − total fixed income (minimum zero — surplus years need no withdrawal)
- Portfolio grows at real return rate, then subtracts the required withdrawal
Withdrawal rate = required withdrawal ÷ portfolio balance at start of year
A Worked Example
Based on the default scenario: 56-year-old couple, $850,000 portfolio, $145,000 spending target, retiring at 65.
Phase 1 — Ages 56–64 (9 accumulation years):
Contributing $20,000/year, 6% ROI, 3% inflation → real return ≈ 2.9%. Portfolio grows from $850,000 to approximately $1,250,000 in today’s dollars.
Phase 2 — Ages 65–69 (pension active, no SS yet):
Pension: $70,000/yr (real value declining ~2%/yr due to 1% COLA vs 3% inflation).
Required from portfolio: ~$75,000/yr.
Withdrawal rate: ~5–6% — the highest-stress period.
Phase 3 — Age 70+ (pension + both SS streams):
Pension ($60,000 real) + SS primary ($52,300) + SS spouse ($21,100) = **$133,000 fixed income**.
Required from portfolio: ~$12,000/yr — withdrawal rate drops below 1%.
Portfolio resumes growing despite withdrawals.
This pattern — moderate withdrawal in early retirement, near-zero after SS kicks in — is why delaying Social Security to 70 is powerful for couples with pension income bridging the gap.
Key Factors That Determine Sustainability
The Gap Period
The most critical stretch is between retirement and when fixed income (pension + SS) fully covers spending. In the example above, ages 65–69 require meaningful portfolio withdrawals while SS hasn’t started. This 5-year gap is when sequence-of-returns risk is highest. A bad market in years 65–69 has much more impact than a bad market at 80.
Strategy: Build a 3–5 year cash/bond buffer specifically for this gap period. If the market drops 30% at age 66, you draw from the buffer rather than selling equities at a loss.
Pension COLA vs. Inflation
A pension with 0% COLA loses half its purchasing power in 24 years at 3% inflation. A pension with full CPI adjustment (like many federal pensions) holds its value indefinitely. The difference between 0% and 3% COLA on a $70,000 pension is enormous over a 35-year retirement — model both scenarios.
Social Security Timing
For couples, the optimal strategy is usually for the higher earner to delay to 70 (maximizing the survivor benefit) while the lower earner claims earlier. The survivor inherits the higher of the two SS benefits — so maximizing the primary benefit protects against the financial shock of losing one income stream.
Sequence of Returns
This calculator uses an average return each year. Real markets don’t cooperate — a 40% drop in year 1 of retirement is far more damaging than the same drop in year 15. Tools like FIRECalc use historical return sequences to stress-test plans. If this calculator shows a comfortable outcome, run a similar scenario in FIRECalc to confirm it holds across historical bad sequences.
Key Assumptions and Limitations
All values shown in today’s purchasing power (real terms). Social Security benefits are assumed to track inflation — in practice, SS COLA has averaged close to inflation historically but is not guaranteed. Pension COLA is applied as entered; verify your plan documents for exact terms. The calculator does not model taxes (pre-tax 401k withdrawals are taxable; Roth withdrawals are not), which can meaningfully affect net income. Required minimum distributions from pre-tax accounts begin at age 73 and may force higher withdrawals than planned. Survivor scenarios (death of one spouse) are not modeled — fixed income typically drops significantly when a spouse dies (one SS check disappears; pension may or may not have survivor benefits). Healthcare costs, which are often the largest variable expense in retirement, are not separated from the spending target. Results are projections based on constant average returns — actual outcomes depend on the sequence and timing of returns.
Frequently Asked Questions
What is the 4% rule and does this calculator use it?
The 4% rule states that you can withdraw 4% of your portfolio in the first year of retirement, adjust that amount for inflation each year, and have a high probability of not running out of money over a 30-year retirement. This calculator takes a different approach: instead of starting with a fixed withdrawal percentage, it calculates what withdrawal rate is actually required each year after accounting for pension and Social Security income. In years where fixed income exceeds your spending target, the withdrawal rate is 0% — your portfolio grows untouched.
How does a pension affect retirement sustainability?
A pension dramatically reduces portfolio dependence because it provides guaranteed income regardless of market conditions. A $70,000 pension covers a large portion of a $145,000 spending target, meaning only $75,000 needs to come from the portfolio until Social Security kicks in. The lower the required portfolio withdrawal, the lower the sequence-of-returns risk — bad markets early in retirement matter much less when your portfolio isn't being drawn down heavily.
What is the difference between nominal and real (inflation-adjusted) returns?
Nominal return is the stated investment return before accounting for inflation. Real return adjusts for inflation: real return = (1 + nominal) / (1 + inflation) − 1. A 6% nominal return with 3% inflation gives a real return of approximately 2.9%. This calculator works entirely in today's dollars (real terms), so the spending target stays constant and you can see purchasing power directly. Pension COLA below inflation means the pension loses real purchasing power each year.
Should I claim Social Security at 62, 67, or 70?
Claiming at 70 maximizes your monthly benefit — approximately 76% more than claiming at 62, and 24% more than claiming at 67 (full retirement age). The break-even point for delaying from 67 to 70 is typically around age 82–83: if you live past that age, claiming at 70 results in more total lifetime income. For married couples, the higher earner delaying to 70 is especially valuable because the surviving spouse inherits the higher benefit. Use the Social Security break-even calculator to model your specific numbers.
How does this calculator handle spousal Social Security?
Enter each person's expected benefit separately. The spouse's benefit should reflect whichever is higher: their own earned benefit, or 50% of the primary earner's full retirement age benefit (spousal benefit). If the spouse's own benefit at their full retirement age is less than 50% of the primary's FRA benefit, they may qualify for a higher spousal benefit — check SSA.gov for your specific numbers. Spousal benefits do not increase by delaying past full retirement age (unlike the primary earner's benefit, which grows until 70).
What does the calculator not account for?
This calculator does not model: taxes on withdrawals (pre-tax 401k vs Roth vs taxable accounts), survivor scenarios (income change when a spouse dies), healthcare costs before Medicare eligibility at 65, required minimum distributions from pre-tax accounts starting at age 73, or sequence-of-returns risk (the specific order of good and bad years matters, not just the average). For a more complete picture, consider running scenarios in tools like Boldin or consulting a fee-only financial planner.