If you've ever tried to answer the question "how much retirement income will I actually have?" you've probably ended up with three different numbers from three different calculators and no idea which one to trust. That's because most retirement tools focus on savings — the lump sum in your 401(k) or IRA — when the question that actually matters is simpler: how much money will land in your bank account each month once the paychecks stop?
The good news is that you don't need a financial degree to figure this out. You need four steps, done in order, with real numbers instead of guesses. Here's the plain-English version.
A $700,000 retirement account sounds like a lot — until you have to figure out how to turn it into a paycheck that lasts 25 or 30 years. Retirement savings is a balance. Retirement income is a monthly number: what you can safely spend without running out. Confusing the two is the single biggest reason people either overspend early in retirement or under-spend out of fear the whole way through. The four-step method below converts your savings, benefits, and other assets into that monthly number.
Start with your most predictable income, because it's the floor everything else is built on. According to the Social Security Administration (Understanding the Benefits, 2026), benefits are designed to replace only about 40% of the average worker's pre-retirement earnings. And the dollar amounts are modest: as of May 2026, the average monthly Social Security check for a retired worker was $2,082.76 (Social Security Administration, Monthly Statistical Snapshot, May 2026). You can find your own estimated benefit at your mySocial Security account, and your claiming age matters enormously — delaying from 62 to 70 increases your monthly benefit by roughly 77%. At a full retirement age of 67, claiming at 62 pays 70% of your primary insurance amount while claiming at 70 pays 124% (Social Security Administration, 2026).
If you or a spouse has a pension, add the monthly amount here too. Same for rental income you plan to keep collecting, or annuity payments already in place. This step is only about money that shows up automatically, regardless of the stock market.
Common planning benchmarks put the target at roughly 70% to 85% of your pre-retirement income — the Social Security Administration notes most financial advisors suggest 70% or more, while the U.S. Office of Personnel Management's Federal Ballpark E$timate uses 75% to 85% — to maintain your current lifestyle, since some costs (commuting, retirement savings contributions, payroll taxes) disappear while others (healthcare, travel) can rise. If you're earning $90,000 a year now, that puts your target retirement spending somewhere between $63,000 and $76,500 a year (illustrative example — not a projection for any specific person). Use your real budget if you have one — it beats any rule of thumb.
Subtract Step 1 from Step 2. Whatever is left is the gap your savings and investments need to fill every year. Here's a simplified example to show the math (not a real client, just illustrative numbers):
That $29,500 figure is the number your savings need to produce every year, adjusted for inflation, for the rest of your life.
This is where most DIY retirement math falls apart, because a savings balance doesn't automatically become an income stream. One widely referenced framework is the "4% rule," first published by financial planner William Bengen in 1994 and later supported by the 1998 Trinity study, which suggests that withdrawing about 4% of your portfolio in year one, then adjusting that dollar amount for inflation each year after, has historically had a reasonable chance of lasting around 30 years. It's a rule of thumb, not a guarantee — market returns, sequence of returns, and how long you live all affect the outcome. To cover a $29,500 gap using the 4% framework, you'd be looking at roughly a $737,500 portfolio dedicated to that purpose (illustrative example, continuing the numbers above).
Some people supplement market-based savings with tools designed for predictable income, such as annuities, which can convert a portion of savings into a contractual income stream, or the cash value inside a properly structured indexed universal life insurance policy, which may be accessible through policy loans or withdrawals that can carry tax advantages when the policy is properly structured and remains in force (if a policy lapses with an outstanding loan, the distribution may become taxable). IUL policies credit interest subject to a 0% floor, meaning a negative index year does not produce negative credited interest — but cost-of-insurance and administrative charges are still deducted, so cash value can still decline. Caps and participation rates limit the upside, and results depend on policy design, funding, and carrier performance. None of these are guarantees of a specific outcome, but they're worth understanding as pieces of the puzzle.
Running these four steps by hand works, but it's easy to make an error or forget an income source. Our free retirement income calculator covers the same ground — your income sources, your target spending, and the gap between them — in a couple of minutes, no spreadsheet required.
Calculating the gap is step one of a longer conversation about retirement income planning: which accounts to draw from first, how to manage taxes on withdrawals, and how much of the gap should be covered by guaranteed income versus market-based savings. There's no universally "right" mix — it depends on your risk tolerance, health, and other assets.
According to the Social Security Administration, benefits replace about 40% of the average worker's pre-retirement earnings. Common benchmarks suggest replacing roughly 70% to 85% of your total income in retirement (Social Security Administration; U.S. Office of Personnel Management, Federal Ballpark E$timate), so Social Security alone typically isn't enough.
No. It's a widely referenced planning framework based on historical market data, not a guarantee. Actual results depend on market performance, inflation, how long you live, and your specific portfolio mix.
It depends on your current spending, health, housing situation, and goals. A common starting benchmark is 70% to 85% of your pre-retirement income (Social Security Administration; U.S. Office of Personnel Management), then adjusted based on your real budget.
Certain types of permanent life insurance, like indexed universal life, build cash value that can potentially be accessed tax-advantaged later in life as a supplemental income source. It's not a replacement for traditional retirement savings, but it can be one piece of a diversified plan.
The earlier the better, since it's much easier to adjust your savings rate or timeline with 15-20 years of runway than with five. That said, running the numbers at any age gives you a clearer picture of where you stand than not running them at all.
You don't need to have every answer today — you just need to know where you currently stand so you can close the gap on your own timeline. Take our free Gap Score assessment: it takes about 2 minutes, requires no email, and gives you a clear read on how your current coverage and savings line up with your goals. Or call Bryan Cohen directly at (786) 247-4653 to talk through your specific numbers.
This article is educational and general in nature. It is not investment, tax, or legal advice, and it is not a recommendation to buy or sell any product or security. Atlas Ridge Insurance is a licensed life insurance brokerage; we do not provide investment advisory services and are not registered as an investment adviser. The 4% rule and income-replacement benchmarks referenced above are historical planning frameworks, not predictions or guarantees, and individual results will vary. Consult a qualified tax professional or investment adviser regarding your specific situation. Insurance product guarantees are subject to the claims-paying ability of the issuing carrier.