Free tool
Retirement Income Gap Calculator
Social Security is a floor. How big is the gap above it?
Shortfall at retirement
$392,854
Close it by saving about $754 more a month, or the money runs out at 84.
- Yearly gap todayIncome wanted less Social Security and pension
- $40,000
- Yearly gap at retirementAfter 2.5% inflation
- $68,863
- Savings needed at retirementTo pay the gap for 25 years
- $1,454,092
- Savings you are on course for
- $1,061,238
- Shortfall
- $392,854
Before tax. An income annuity can turn part of a lump sum into income for life; the gap is what it would need to cover.
Someone in their forties opens a Social Security statement and wonders whether it will be enough. This free InsureCard calculator takes the income you want in retirement, subtracts Social Security and any pension, and shows the savings that gap needs, what you are on course for, and the extra monthly saving that closes it.
Updated
The formula
Gap = income wanted − Social Security − pension (today's money)
Needed at retirement = Σ Gap × (1 + inflation)^(n + t) ÷ (1 + return in retirement)^t, for each year t of retirement
On course for = savings × (1 + r)^n + yearly saving × ((1 + r)^n − 1) ÷ r
n is the years until you retire and r the return before retiring. The gap is paid at the start of each year of retirement and rises with inflation; savings earn the return in retirement meanwhile.
The shortfall is what you need less what you are on course for. The extra saving spreads it over the years you have left, at the same return.
A worked example: $70,000 a year from 67
A 45-year-old wants $70,000 a year from 67 to 92, and expects $30,000 from Social Security: a $40,000 gap in today's money, $68,863 by retirement at 2.5% inflation.
Paying that for 25 years takes $1,454,092 at retirement. With $150,000 saved and $12,000 added each year at 6%, they are on course for $1,061,238, $392,854 short. About $754 more a month closes it.
Start from your Social Security estimate
The Social Security Administration's benefit calculators give an estimate at different claiming ages; the one in your my Social Security account uses your own earnings record. Enter it in today's dollars.
Claiming later raises the benefit, which shrinks the gap. Try the calculator at two retirement ages to see the difference.
How long should the money last?
Longer than the average. The SSA's Life Expectancy Calculator shows the average years left for someone your age, and many people live well past it.
Planning to 90 or beyond is common. An income annuity can turn part of a lump sum into income for as long as you live, however long that is.
Questions
What is a retirement income gap?
It is the difference between the income you want in retirement and what Social Security and any pension will pay. Your savings, or an annuity bought with them, have to fill it every year you are retired.
How much do I need to retire?
Enough to pay your yearly gap, rising with inflation, for every year of retirement. The calculator works it out from your income goal, Social Security estimate, retirement age and the age you plan for.
What return should I use?
Use a cautious figure after fees: lower during retirement, when most people hold safer investments. Try a lower and a higher rate to see how much the answer depends on it.