How much do I need
to retire?
Most calculators give you one number. Here's why that's the wrong question — and how to model your retirement year by year instead.
The problem with
one number
Search "how much do I need to retire" and you'll get a lot of answers that look like this: 25 times your annual spending, or $1.5 million, or 80% of your pre-retirement income. These rules of thumb aren't useless — but they hide so much complexity that they can be genuinely misleading.
The 25x rule (also called the 4% rule) assumes a constant withdrawal rate, a fixed retirement date, no pension, no Social Security, no taxes, no inflation-adjusted spending changes, and no large one-time expenses. It was derived from historical U.S. stock market returns and a 30-year retirement window. If your situation differs from those assumptions in any meaningful way — and it almost certainly does — the number it gives you could be off by hundreds of thousands of dollars.
The real question isn't "how much do I need?" It's: do my assets, income sources, and spending hold together year by year, through taxes and inflation, for the rest of my life?
What actually
matters
A realistic retirement model needs to account for several interacting factors. None of them is complicated on its own, but they compound in ways that make single-number estimates unreliable.
Every year earlier you retire means one less year of saving and one more year of spending. The difference between retiring at 55 and 62 can be $500K+ in required savings.
Planning to age 85 vs. 100 changes the math dramatically. Running out of money at 88 is a very different outcome than having a comfortable cushion at 95.
A dollar in a Roth IRA is worth more than a dollar in a traditional 401(k) because one is tax-free and the other isn't. The type of account matters as much as the balance.
Your spending doesn't stay flat for 30 years. Early retirement might mean more travel. Later years often mean higher healthcare costs. A flat spending assumption misses both.
Income sources
change everything
Most retirement number calculators ignore the fact that retirement income doesn't come from savings alone. Social Security, pensions, and annuities can cover a substantial portion of your spending (see our guide on managing multiple income sources) — but they start at different ages and interact with your tax situation in specific ways.
Social Security is the biggest variable most people overlook. Claiming at 62 vs. 70 can mean a 76% difference in your monthly benefit — for life. That decision ripples through your entire projection: it changes how much you withdraw from savings each year, how much tax you owe, and when (or whether) your portfolio depletes.
Pensions and annuities create guaranteed income floors. If a pension covers $30,000/year of your $60,000 spending need, your portfolio only has to generate the other half. That's a fundamentally different withdrawal rate than someone with no guaranteed income.
This is why a single number can't capture your situation. Two people with identical savings but different Social Security timing, different pension coverage, and different retirement ages need very different amounts.
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The tax factor
most people miss
Retirement calculators that ignore taxes are telling you how much pre-tax money you'll have — not how much you can actually spend. For someone withdrawing $80,000/year from a traditional 401(k), federal income tax alone could take $8,000–$12,000 of that, depending on filing status and other income.
The math gets more complex when you add Social Security. Up to 85% of your Social Security benefit can be taxable, depending on your combined income. So the more you withdraw from tax-deferred accounts, the more of your Social Security gets taxed, which means you need to withdraw even more to cover the tax bill. This feedback loop — called tax gross-up — is invisible in simple calculators but can cost you thousands per year.
State income taxes add another layer. Depending on where you live, your effective tax rate could be 0% (Florida, Texas, Nevada) or 10%+ (California, New Jersey). The difference over a 30-year retirement is enormous.
Drawdown Arc models 2026 federal tax brackets with progressive rates, standard deductions by filing status, and iterative tax gross-up so your withdrawal actually covers the bill.
Pro users can select any of the 50 states to see how state income taxes change their projection — flat rates, progressive brackets, and the nine no-income-tax states are all built in.
Inflation is
quiet and relentless
If you need $60,000/year today, you'll need roughly $80,000 in 10 years and $108,000 in 20 years at 3% inflation. That's not a crisis in any single year, but it compounds into a real problem: your spending rises while your fixed income sources (like pensions without COLA) stay flat.
A good retirement model applies inflation to your spending target each year, separately from investment growth. This lets you see the widening gap between what you need and what your income covers — and exactly which year your portfolio has to start filling that gap more aggressively.
Social Security includes a cost-of-living adjustment (COLA) that partially offsets inflation. Pensions may or may not. If your pension doesn't have a COLA, its real purchasing power declines every year — and your portfolio has to make up the difference. A year-by-year projection makes this visible in a way that a single number never can.
Withdrawal order
is a hidden lever
Not all retirement accounts are the same. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Roth withdrawals are tax-free. Taxable brokerage withdrawals consist of return of cost basis (not taxed) and realized capital gains (taxed at long-term rates of 0%, 15%, or 20% depending on your total income). Drawdown Arc applies long-term capital gains rates to taxable brokerage withdrawals automatically using a blended average approach, so your projection reflects realistic after-tax withdrawals. The order in which you draw from these accounts can significantly change your lifetime tax bill.
A common default strategy is to spend taxable accounts first, then tax-deferred, then Roth. But the optimal order depends on your specific situation — your tax bracket each year, whether you're subject to Required Minimum Distributions (RMDs), and how much of your Social Security becomes taxable based on your combined income.
This is another area where a single retirement number falls apart. Two people with the same total savings but different account mixes (say, $800K in a 401(k) vs. $500K in a 401(k) + $300K in a Roth) will have meaningfully different after-tax income in retirement — even though their net worth is identical.
Year-by-year modeling:
how it works
Instead of producing a single number, a year-by-year projection builds a complete financial timeline from your current age through end of life. Each year, the model calculates:
Each account balance grows by its assigned rate. Different accounts can have different growth assumptions — conservative for cash, moderate for bonds, aggressive for equities.
Social Security kicks in at your chosen start age. Pension income begins when specified. Your spending need rises with inflation. The model calculates the gap each year.
When income doesn't cover spending, the model withdraws from your accounts in priority order. It knows which accounts are taxable and adjusts the withdrawal to cover the resulting tax bill.
Federal (and optionally state) tax is calculated each year based on actual income. Social Security taxation rules, progressive brackets, and standard deductions are all applied.
The result is a table and a set of charts showing exactly what happens to your money each year. You can see the year your portfolio peaks, the year withdrawals start outpacing growth, and — if applicable — the year your assets deplete. You can also see your effective tax rate, your funding ratio, and how sensitive the outcome is to your retirement age.
This is what Drawdown Arc builds for you automatically, in real time, as you adjust your inputs. Change your retirement age by one year and the entire projection recalculates instantly.
Try it
yourself
Drawdown Arc's free calculator lets you build a full year-by-year projection with real tax math, Social Security modeling, and custom growth rates — no signup required. Your data stays in your browser and is never sent to a server.
Pro unlocks deeper tools — Monte Carlo simulation, stress testing, Roth conversion analysis, state tax modeling, saved scenarios, side-by-side comparison, and professional PDF reports you can share with your advisor.
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