How much can you spend in retirement?

Start with spending, not a withdrawal percentage

A portfolio withdrawal rate describes how much is removed from savings. A spending plan describes what the household actually expects to use. They are not the same because Social Security, pensions, and other income can fund part of spending before the portfolio is touched, while income taxes and some healthcare costs can require additional withdrawals.

Rules of thumb such as beginning near 4% of a portfolio can be useful for an initial check, but they depend on the time horizon, allocation, inflation adjustment, fees, taxes, and willingness to reduce spending. Treat a percentage as a starting assumption—not a guarantee or personalized answer.

Build the first-year amount carefully

Begin with recent actual spending rather than an aspirational estimate. Remove expenses that will truly end, add costs expected after retirement, and convert monthly or occasional items into one annual amount. Keep enough detail outside the planner to know what could be reduced if the plan encounters stress.

Common items to review include:

• Housing, property taxes, maintenance, utilities, and future moves.
• Food, transportation, insurance, subscriptions, and personal spending.
• Travel, hobbies, gifts, charitable giving, and family support.
• Health insurance before Medicare and Medicare costs afterward.
• Out-of-pocket healthcare, dental, vision, hearing, and long-term-care exposure.
• Debt payments and the year each obligation is expected to end.
• Large recurring or irregular purchases that are not visible in a typical month.

Know what the planner's Annual Spending includes

Annual Spending is the amount expected during the complete first projection calendar year. The planner increases it in later years using modeled inflation. Federal and state income taxes are calculated separately and added to the cash that must be funded, so they should not also be included in Annual Spending.

The default Medicare model assumes Medicare and healthcare are already included in Annual Spending. When the custom Medicare model says spending excludes healthcare, the planner can add standard Part B, calculated IRMAA, Part D or other coverage, and out-of-pocket costs. Make one consistent choice so healthcare is not counted twice or omitted.

Inflation changes purchasing power

Inflation means the same number of future dollars generally buys less. The planner therefore increases annual spending using the selected inflation assumption and reports inflation-adjusted balances in first-projection-year purchasing power.

A broad inflation measure is a planning reference, not a household-specific forecast. Healthcare, housing, travel, and other categories can change at different rates, and an individual's mix may not match the average consumer basket. Test more than one reasonable long-term assumption.

Dependable income reduces portfolio-funded spending

Social Security and pensions can cover part of annual spending regardless of market performance. Delaying Social Security can increase the later monthly benefit, but the portfolio may need to fund more spending while benefits are postponed. This is why claiming age and spending should be evaluated together.

Income amounts should use a consistent dollar basis. If a Social Security estimate is expressed in today's dollars while spending is entered in future claim-year dollars, the comparison can be misleading.

Taxes make withdrawals larger than spending

Withdrawing from a Traditional IRA can create taxable income, which can require an additional withdrawal to pay the resulting tax. Roth conversions can increase current taxes and possibly IRMAA while reducing future tax-deferred balances. A spending plan should therefore be evaluated using the planner's calculated cash flows rather than simply subtracting annual spending from the portfolio.

Why retirement spending may change by phase

Many households expect active travel early in retirement, quieter years later, and potentially higher care costs near the end of life. The current planner uses one general spending amount that changes with inflation; it does not separately model retirement phases, long-term care, debt expiration, or multiple one-time expenses.

To approximate changing phases, run separate comparisons with different spending levels and treat the results as bounds. Do not assume a single smooth amount captures every future need.

How to find a sustainable spending range

1. Enter an expected first-year spending amount based on current records.
2. Confirm whether healthcare is already included and keep income taxes separate.
3. Compare Social Security and Roth strategies under the same spending assumption.
4. Run Risk Analysis and review success through both the horizon and ending ages.
5. Inspect the typical first shortfall age and total shortfall in paths that fail.
6. Repeat with essential-only spending and with a higher lifestyle amount.
7. Test cautious inflation, lower returns, and a longer ending age.
8. Identify a starting amount and reduction plan that remain acceptable across several reasonable tests.

How to interpret a spending shortfall

A shortfall means modeled income and available accounts could not cover all planned spending in a year. It does not necessarily mean every essential expense would go unpaid: the planner currently treats spending as one combined amount. Compare the shortfall with the discretionary portion of the budget to understand how much adjustment might be required.

A strategy that fails only after a very long ending age is different from one that fails near the primary horizon. Frequency, timing, and size of shortfalls are all more informative than a simple pass-or-fail label.

Related guides and resources

• How to interpret Retirement Risk Analysis
• How to compare retirement scenarios
• When should you claim Social Security?
• How retirement income can affect Medicare IRMAA
• Investor.gov: Managing lifetime income
• BLS: Purchasing power and constant dollars