Let’s play with your retirement numbers

Simple Math

If you are already retired, this post won’t help much unless you want to verify some assumptions that you have already committed to. HOWEVER, if you are decades from retirement this post may provide food for thought.

There is no magic in these calculations, it’s simple math using several assumptions. How much you will need to live on each year in retirement, the earnings rate on your investments and the inflation rate. Then there is the unknown; how long should the funds last.

There are other considerations too:

  • Can you live on 70%, 80%, 90% of your income at the time you retire? If you pick one of these percentages, think long and hard about why and how you will do that. I suggest you start with 100% replacement of your base pay before retirement.
  • How will you deal with years in which your investments don’t grow, but shrink? Hint, you need an emergency fund in addition to retirement investments.
  • If you are married or someone is dependent on your income, how will you make it last over two lifetimes?
  • Does your income in retirement allow you to keep saving? Yup, I said it, save in retirement. You need an emergency fund and the ability to replace it. Not as large as when you were working, but you still need one so that a “minor” financial emergency does not throw your long-term plan off kilter.

Let’s look at some example calculations.

At retirement you are earning $65,000 a year, you are age 65 and want to replace 100% of the income. Assume your investments earn 6% a year, and inflation is 3% per year. If you have $1,000,000 to start, your money should last twenty-one years (with each annual withdrawal increasing for inflation). That gets you to age 86 … not a good bet in my opinion. Starting with $1.3 million gets you to age 96. REMEMBER, this does not consider Social Security so you have some flexibility.

You could assume a higher investment return or a lower inflation rate, but I like being conservative.

Here’s another example: At retirement you are earning $40,000 a year, you are age 65 and want to replace 80% of the income. Assume your investments earn 6% a year, and inflation is 3% per year. Starting with $650,000 gets you to age 96 (with each annual withdrawal increasing for inflation). REMEMBER, this does not consider Social Security income. In this example the single Social Security annual benefit would be about $13,728.

ALSO, if you have a pension, adjust the income you need to generate accordingly. Income at retirement – pension income – Social Security income = income from savings.

A reality check. Here is what the picture looks like today. $195,000 generates little income, about $7,800 a year in fact.

Ages 60-69

  • Average 401(k) balance: $195,500
  • Contribution rate: 11.2% of compensation
  • Goal by age 67: 10x your income

Source: https://twocents.lifehacker.com/how-much-you-should-have-in-your-401-k-based-on-your-1845657209

Whatever your retirement income goal may be, hoping and shooting in the dark won’t cut it.

  • Save
  • Monitor your process and assumptions
  • Adjust
  • Be realistic with your retirement income needs


  1. At age 52, my wife and I were going into a financial hole, It was 1993, and we were still renting. Our salaries had not kept up with our expenses, and our landlord had told us that next year he would raise our rent for our little cottage in Hawaii to $1000/month. We decided to give up on saving a retirement portfolio to buy a house, using our savings as a down payment. Homes are expensive in Hawaii.
    We found a ramshackle place a half-hour commute away, and gave up our savings plus a $1000/month 10 year mortgage The total price was $340,000. We finished paying in 2004, and since we had pensions, we could retire in 2010 at 68. It all worked out.


  2. I retired at 50 and my wife and I are now 64, I am saving almost all of our SS each month and living on my USAF pension. I see a future where new retirees will not even need to own a car. My wife and I are spending the winter with my daughter’s family in GA . The Montana winters are just getting too cold after 25 years. Because of Covid we have everything delivered by shopping online Instacart, WM+, Sam’s Club, Amazon Prime, and EBay, meet all of our needs. I have not used my car at all in the last 2 weeks. Just think of the thousands of dollars saved in retirement – No purchase price, No insurance, No maintenance or repairs, No fuel. You will have plenty of extra money to use for Uber, Lyft, Rental Car, Train or Air Travel on those few trips per month you may need or eant to leave home. I was thinking I would not even own a car 10 years from now, I think I could give it up by age 70, maybe sooner. My wife even did her last medication management appointment with her doctor on the computer.


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