Retirement Income Planning Guide
How your portfolio, Social Security, and other income sources fit together — and why the tax character of your accounts matters more than most people realize.
Phase 1: Accumulation
During your working years, the goal is straightforward: invest consistently and let compounding do its job. Each year, your portfolio grows by its investment return plus your contributions. Time is the key variable — starting 10 years earlier can double the portfolio you bring to retirement, often without increasing contributions.
The projector models this as a simple annual return on the current balance plus a fixed annual contribution. Contributions are in today's dollars; returns are nominal.
Phase 2: Decumulation
At retirement the math flips. Instead of building the portfolio, you're drawing it down. The key insight is that your spending need is not the same as what you pull from your portfolio — because Social Security and any pension income fill part of the gap first.
The amount the portfolio must provide — the income gap — is what remains after your fixed income sources. The projector models this gap, applies an inflation adjustment each year, and grosses up the withdrawal for tax on pre-tax accounts.
The Income Gap — A Visual Walkthrough
These illustrative numbers show how spending gets covered. Your actual inputs will produce different figures.
Monthly Spending Target
$5,000 / month
Your inflation-adjusted lifestyle cost
Portfolio Must Cover
$2,800 / month
$33,600 per year (in today's dollars)
Gross Withdrawal Needed (Pre-Tax Account)
$3,590 / month
$43,077 per year — about $9,477 goes to taxes
Why it matters: A traditional pre-tax portfolio effectively needs to be larger than a Roth portfolio to support the same after-tax spending goal. At a 22% effective rate, every $1.00 of net spending requires $1.28 from a pre-tax account.
Inflation: The Invisible Cost
At 3% annual inflation, $5,000/month of spending today becomes approximately $6,720/month in 10 years and $9,030/month in 20 years. The projector inflation-adjusts your spending target every year, which is why long-horizon projections can look more daunting than a simple "4% rule" estimate.
Social Security and pension income are also inflation-indexed in the projector — consistent with how the Social Security Administration calculates Cost-of-Living Adjustments (COLAs). This keeps the income gap calculation realistic over time.
The Three Scenarios
No one knows exactly what the market will do. The projector runs three scenarios simultaneously so you can see the range of outcomes:
Conservative
Your base return rates reduced by 2.0% (pre-retirement) and 1.5% (post-retirement). Use this to stress-test your plan against below-average market conditions.
Base Case
The rates you enter. A reasonable long-run average assumption — typically 6–8% pre-retirement and 4–6% post-retirement for a diversified portfolio.
Recommended
Advisor-specified parameters — retirement age, savings rate, return assumptions, spending target, and Social Security strategy — that reflect an actionable plan. Use this to show a client what a realistic course correction looks like versus their current trajectory.
A good plan should work in all three. If your Conservative scenario runs out of money at 78 but your Base scenario lasts to 90, the Recommended scenario can show the concrete steps — such as adjusting spending, increasing contributions, deferring Social Security to age 70, or working one to two additional years — that close the gap.
The 4% Guideline
A common rule of thumb says you can withdraw about 4% of your portfolio per year with a high probability of not outliving your money over a 30-year retirement. This implies a portfolio roughly 25× your annual spending gap (before tax gross-up).
At $2,800/month in portfolio gap ($33,600/year), the 4% rule implies a target of roughly $840,000 at retirement. After tax gross-up at 22%, that climbs to about $1,077,000 in pre-tax dollars. The projector models your actual balance year by year — which is more accurate than a rule of thumb but makes the same point: tax-efficient account structure matters.
This guide is for educational and planning purposes only and does not constitute individualized investment, tax, or legal advice. Illustrative numbers are examples only. Return assumptions may not reflect future market conditions. Tax estimates are simplified and do not account for state income taxes, deductions, or other factors. Obtain your personalized Social Security estimate at ssa.gov. Please consult your advisor before making financial decisions.