Retirement Income Calculator

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Retirement Income Calculator
An example calculation using sample data

Green text describes the example data.
Blue text describes the terminology and how to use the calculator.
To hide the help text, check this box and click the update button.
... or see more options at the bottom of the page ...
The example data is for a person who is currently age 45. There is a Roth IRA account valued at $25,000, a Traditional IRA account valued at $150,000, and a regular (taxable or non-retirement) account valued at $125,000. The example assumes an annual inflation rate of 3% and an annual investment rate of return of 7%.
Initial values for the calculation

Current age: current age of the user, in years
Inflation rate: % the default value represents the approximate average inflation rate in the United States for the past couple of decades
Investment rate of return: % the rate of return on your investments depends on your investment mix, and on market conditions Starting account values:
Roth IRA: the starting value of the Roth IRA account, an account that generally allows for tax-free earnings and distributions
Traditional IRA: the starting value of the Traditional IRA or 401(K) account, an account that generally allows for tax-deferred earnings
Regular (taxable): the starting value of the regular (non-retirement) account

All values are stated in current dollars, in order to simplify the usage of the calculator. For example, you don't have to figure out what your spending will be in the future as a result of higher prices. The given inflation rate is used to reduce the investment returns and to reduce the value of future pensions, to account for the reduced spending value caused by inflation.

Initially, this person is in Savings mode, adding $4,000 to the Roth IRA account each year, and $10,000 to the Traditional IRA account each year. This will continue for 10 years.
Values for Phase 1 (starting at age 45)

Pension: amount of pension received annually; this is assumed to be a "fixed-income" payment (i.e., a payment that will not receive future "cost of living" increases). Therefore, the purchasing power of the pension will decrease in future years as a result of inflation
Social Security: amount of Social Security received annually; this is assumed to include "cost of living" increases each year, so that the purchasing power does not decline due to inflation
Roth IRA Conversion: amount of money converted each year from a Traditional IRA to a Roth IRA (which is generally a taxable event) Saving Spending
In the calculation, each phase is either a Savings phase, representing "earning" years in which money is being added to the retirement accounts, or a Spending phase, representing "retirement" years, in which money is being withdrawn from the accounts.
Roth IRA: amount of money added to or withdrawn from the Roth IRA account each year
Traditional IRA: amount of money added to or withdrawn from the Traditional IRA account each year

Amount added to Regular (taxable) account: (only for Saving mode) amount of money added to the Regular (taxable) account each year. [NOTE: In the Spending phase, do not put an entry here. Withdrawals from the Regular account will be determined by the amount of Total Spending, below.]
Total amount of Spending from all sources (only for Spending mode) amount of total annual spending, if you are in the Spending phase. The calculator will determine how much has to come out of the Regular account to supplement the amounts from the other sources.
Repeat pattern for: years, or until age number of years that this pattern should be repeated, or age at which the phase ends, whichever comes first (you may specify either one or both values)

Results for Phase 1
The following table shows the results of the retirement income calculation. The final column shows the total of taxable items, which generally include the Roth conversion, distributions from the Traditional IRA, and the pension and Social Security income. Individual circumstances may vary, and other taxable income is not included here, such as wages, dividends, interest, and capital gains that occur in the regular account.

Age Account Values Roth Conv. Spend from (Save to) each account Tax Impact

Reg. Roth IRA Trad. IRA Total Reg. Roth IRA Trad. IRA Pens. Soc. Sec. Total

45 125 25 150 300 0 0 (4) (10) 0 0 (14) 0
46 130 30 166 326 0 0 (4) (10) 0 0 (14) 0
47 135 35 183 353 0 0 (4) (10) 0 0 (14) 0
48 141 41 200 381 0 0 (4) (10) 0 0 (14) 0
49 146 46 218 410 0 0 (4) (10) 0 0 (14) 0
50 152 52 237 441 0 0 (4) (10) 0 0 (14) 0
51 158 58 256 472 0 0 (4) (10) 0 0 (14) 0
52 164 64 276 505 0 0 (4) (10) 0 0 (14) 0
53 171 71 297 540 0 0 (4) (10) 0 0 (14) 0
54 178 78 319 575 0 0 (4) (10) 0 0 (14) 0
55 185 85 342 612

Then, at age 55, this person retires, and enters the Spending phase -- $20,000 from the Roth IRA, and enough from the regular account to total $40,000. Also, $25,000 is converted from the Traditional IRA account to the Roth account. This continues for 10 years.
Values for Phase 2 (starting at age 55)

Pension:
Social Security:
Roth IRA Conversion: Saving Spending
Roth IRA:
Traditional IRA:

Amount added to Regular (taxable) account: (only for Saving mode)
Total amount of Spending from all sources (only for Spending mode)
Repeat pattern for: years, or until age

Results for Phase 2

Age Account Values Roth Conv. Spend from (Save to) each account Tax Impact

Reg. Roth IRA Trad. IRA Total Reg. Roth IRA Trad. IRA Pens. Soc. Sec. Total

55 185 85 342 612 25 20 20 0 0 0 40 25
56 172 93 331 597 25 20 20 0 0 0 40 25
57 159 102 319 581 25 20 20 0 0 0 40 25
58 146 111 307 564 25 20 20 0 0 0 40 25
59 132 121 294 546 25 20 20 0 0 0 40 25
60 117 131 281 528 25 20 20 0 0 0 40 25
61 101 141 267 509 25 20 20 0 0 0 40 25
62 86 151 253 490 25 20 20 0 0 0 40 25
63 69 162 238 469 25 20 20 0 0 0 40 25
64 52 174 222 448 25 20 20 0 0 0 40 25
65 34 186 206 426

Finally, at age 65, a pension and Social Security payments begin, and the spending from the regular and IRA accounts can be reduced. Note that the purchasing value of the pension has been reduced by inflation, whereas the Social Security payment always has the same purchasing power because of cost-of-living adjustments. The total spending continues at $40,000.
Values for Phase 3 (starting at age 65)

Pension:
Social Security:
Roth IRA Conversion: Saving Spending
Roth IRA:
Traditional IRA:

Amount added to Regular (taxable) account: (only for Saving mode)
Total amount of Spending from all sources (only for Spending mode)
Repeat pattern for: years, or until age

Results for Phase 3

Age Account Values Roth Conv. Spend from (Save to) each account Tax Impact

Reg. Roth IRA Trad. IRA Total Reg. Roth IRA Trad. IRA Pens. Soc. Sec. Total

65 34 186 206 426 0 0 12 12 6 10 40 28
66 35 181 202 418 0 1 12 12 5 10 40 27
67 35 177 199 411 0 1 12 12 5 10 40 27
68 36 172 195 402 0 1 12 12 5 10 40 27
69 37 167 190 393 0 1 12 12 5 10 40 27
70 37 161 186 384 0 1 12 12 5 10 40 27
71 37 156 181 374 0 1 12 12 5 10 40 27
72 37 150 177 364 0 1 12 12 5 10 40 27
73 37 144 172 353 0 2 12 12 4 10 40 26
74 37 138 167 341 0 2 12 12 4 10 40 26
75 37 131 161 329

At the end of this example (age 75), the person would have $37,000 in the regular account, $131,000 in the Roth IRA account, and $161,000 in the Traditional IRA account.

Negative values, which are shown in red, would indicate that an account had run out of money!
To do your own calculation, fill in the boxes in the form, starting at the top, and click the update button. The best approach is to calculate one phase at a time; i.e., fill in the values for the first phase, and click Update. If you are satisfied with the results for the first phase, then fill in values for the second phase, and update again. Repeat until you have calculated as many phases as you need.
Values for Phase 4 (starting at age 75)

Pension:
Social Security:
Roth IRA Conversion: Saving Spending
Roth IRA:
Traditional IRA:

Amount added to Regular (taxable) account: (only for Saving mode)
Total amount of Spending from all sources (only for Spending mode)
Repeat pattern for: years, or until age

Results for Phase 4

Age Account Values Roth Conv. Spend from (Save to) each account Tax Impact

Reg. Roth IRA Trad. IRA Total Reg. Roth IRA Trad. IRA Pens. Soc. Sec. Total

75 37 131 161 329

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