How to estimate your real monthly retirement income

How to estimate your real monthly retirement income

The number that matters is what hits the bank account every month after taxes and Medicare. Most people calculate the wrong number. Here's the right way, in about 20 minutes with a pen.

Most retirement calculators ask the wrong question. They ask how much you've saved. The right question is what your monthly check looks like after the IRS, Medicare, and inflation take their cuts. Until you know that number, you can't know if you're ready.

Here's the back-of-envelope version. Twenty minutes, a pen, and a real estimate by the time you're done.

Step 1: Add up your guaranteed monthly income

Three sources to count. Social Security. Pensions. Annuities. All of these pay a fixed monthly amount that doesn't depend on the market.

For Social Security, use the projected benefit at the age you plan to claim. Find it at ssa.gov in your account. For someone retiring at 67 with average lifetime earnings, the number is usually somewhere between $1,800 and $2,800 a month. Use your actual number, not the average.

For pensions, you'll see a monthly figure on your benefits statement. If you have the choice between a lump sum and a monthly pension, that's a separate analysis. For now, use the monthly number.

Add them up. Call that A.

Step 2: Calculate what your savings will produce monthly

The simple version: take your total retirement savings balance and divide by 300. That's the monthly income you can pull while having a reasonable chance the money lasts 30 years.

Example. You have $500,000 in IRAs, 401(k)s, and brokerage accounts. $500,000 divided by 300 is about $1,667 a month.

This is the 4 percent rule restated as a monthly number. It's not perfect. It assumes a normal mix of stocks and bonds and average market conditions. In a bad decade, you can draw less. In a great decade, you can draw more. But as a starting estimate, 1/300th of your balance per month is reasonable and widely cited by financial planners.

Call that B.

Step 3: Subtract what comes off the top

Three deductions. Each one hits the same month it lands.

Federal income tax

Social Security is partially taxable depending on your other income. For most retirees, 50 to 85 percent of the benefit ends up taxable. Pension income is fully taxable. Traditional IRA and 401(k) withdrawals are fully taxable as ordinary income. Roth withdrawals are not.

Simple rule of thumb for couples in retirement: assume 12 to 15 percent of the taxable portion of your income goes to federal tax. For high earners, more. For lower earners with mostly Social Security, often less or even zero.

Medicare premiums

Part B premium is $202.90 a month per person in 2026.1 For a couple both on Medicare, that's $405.80 a month off the top. Add a Medicare Supplement or Advantage premium and a Part D premium and the real number for a couple is closer to $700 to $900 a month, depending on the plan.

If your income is above $109,000 single or $218,000 joint, you also pay IRMAA on top of the standard premium. IRMAA can push the per-person Part B premium over $600.

State income tax

Varies wildly. Florida, Texas, Tennessee, Nevada, Wyoming, Washington, South Dakota, and Alaska have no state income tax. New York, California, and Oregon tax retirement income aggressively. Most other states fall in the middle. Pull up your state's retirement income rules.

Step 4: Do the math

Let's run a real example. A couple, both 67, both retiring in 2026. They have $700,000 in combined retirement accounts and $0 in pensions.

Combined Social Security at full retirement age: $4,500 a month

Savings of $700,000 divided by 300: $2,333 a month

Pre-deduction monthly income: $6,833

Medicare premiums (both): $700 a month including a supplement and Part D

Estimated federal tax on the taxable portion: about $450 a month

State tax (medium-tax state): about $200 a month

Real monthly take-home: roughly $5,483

That's what hits the checking account each month. $5,500 a month is $66,000 a year. For most middle-class couples, that's a livable but not lavish retirement. It's also the honest number most calculators don't give you.

Step 5: Compare to your spending

Now the other side of the equation. Add up your current monthly spending in three buckets. Fixed costs (mortgage, insurance, utilities, car payment). Variable costs (food, gas, household). Discretionary (travel, hobbies, dining out).

Subtract the costs that go away in retirement. The big ones are: payroll taxes (Social Security and Medicare tax come off paychecks, not retirement checks), commuting costs, work clothes, and any retirement savings you're currently putting in.

If your real monthly retirement income from Step 4 covers your adjusted monthly spending from Step 5, you're in shape. If there's a gap, you have three options. Work longer. Save more. Or accept a leaner retirement. Most people use some mix of all three.

Three traps to avoid

First. Don't assume your spending will drop in retirement. Some categories do (commuting, work expenses). Others go up (healthcare, travel, leisure spending in the early years). The total often stays flat for the first decade.

Second. Don't forget required minimum distributions. Starting at age 73, the IRS makes you withdraw a minimum amount from traditional IRAs and 401(k)s every year. The withdrawals are taxable. They can push you into higher tax brackets and trigger IRMAA. Plan for them.

Third. Don't budget at the maximum withdrawal rate. The 1/300th rule is the upper limit, not the target. If you can live on 1/360th or even 1/400th of your savings each month, you build a safety margin that handles bad market years.

What to do next

Spend 20 minutes with a piece of paper. Write down A (guaranteed income), B (savings divided by 300), and the three deductions. The number you get is the closest most people will come to a real retirement income estimate.

If the number scares you, that's useful. It's better to see the gap five years out than the day you retire. If the number is comfortable, you've earned the next morning's coffee.

Sources

1. U.S. Railroad Retirement Board, Medicare Part B Premiums and Deductibles Will Increase in 2026, November 2025. rrb.gov

2. Social Security Administration, Retirement Benefits and Earnings Test Limits, 2026. ssa.gov

3. Bengen, William P., "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, 1994 — basis for the 4 percent rule

4. Internal Revenue Service, Required Minimum Distributions FAQ. irs.gov/retirement-plans