How We Calculate Your Retirement Income Needs
You may wonder: “How exactly do you calculate my retirement income number?”
That’s a good question—one we’re glad you asked. We’re transparent about our methods, and we’ve spent years refining them based on careful research and real-world scenarios.
Here’s how we approach estimating the amount of monthly income you’ll need to comfortably sustain your lifestyle in retirement, what we call “your number.”
Three Methods of Retirement Income Estimation
Financial planners, retirement experts, and researchers generally agree on three main ways to estimate retirement income needs:
1. The Income Replacement
Ratio Method:
This common approach says you’ll need approximately 70%–90% of your current monthly income to maintain your pre-retirement standard of living.
It’s straightforward and widely accepted, backed by credible research such as:
It’s quick, simple, and based on strong statistical averages.
But it doesn’t account fully for your unique situation.
2. The Current Spending Method (“No Change” Approach)
This straightforward method assumes your current monthly spending habits won’t significantly change in early retirement. For instance, if you spend $8,000 per month now, you’d aim for roughly the same in retirement.
A 2023 Employee Benefit Research Institute (EBRI) report found nearly half of retirees maintain or even increase their spending after retirement. This method is simple but might underestimate future costs like healthcare or inflation.
3. Detailed Line-by-Line Budgeting Method
This comprehensive approach considers every aspect of your finances: housing, insurance, healthcare, travel, taxes, and more. While extremely precise, it’s time-consuming and usually requires expert guidance.
How We Combine These Methods
At What’s Your Number?, we don’t rely on just one method. We’ve combined the best features of each into our proprietary calculation model:
We use carefully selected questions about your housing, lifestyle goals, healthcare coverage, and spending habits.
Our algorithm blends these data points, referencing industry standards and research-backed guidelines.
We factor in age, longevity trends, and spending behavior to produce a personalized retirement income target that is realistic yet simple to grasp.
This gives you an accurate, meaningful starting point—but we know it’s still just an estimate
Ready for a Personalized Plan?
Schedule a free 30-minute Retirement Income Strategy session with a licensed advisor. We’ll walk through your number, identify your income gap, and show you exactly how to cover it with guaranteed income — at no cost to you.
This assessment is provided for educational purposes only and is not intended as investment, tax, or legal advice. Calculations are based on generalized assumptions and may not reflect your exact financial situation. For personalized guidance, always consult with a licensed retirement income professional before making significant financial decisions.