Start With What You’ll Spend—Not What You Earn
Retirement planning isn’t about replacing 100% of your current income. Why? Because several of today’s expenses will disappear. For example:

• Payroll taxes (7.65%) vanish once you stop earning a paycheck—saving $7,650 annually for a $100,000 earner.
• Retirement contributions, like 401(k) savings, often stop once you retire—saving another $10,000 annually if you contribute 10%.
• A paid-off mortgage can eliminate thousands more. A $1,500 monthly mortgage saves $18,000 a year when retired.

Add in lower federal taxes, and a $100,000 income might translate to just $71,000 in actual retirement expenses. That’s where the top-down approach shines—start with your income, then subtract what you won’t need.

The bottom-up approach works too: build your budget by estimating spending across categories. It’s more time-consuming but can offer greater accuracy.

Don’t Forget Non-Portfolio Income
Social Security and other income sources reduce how much you need to withdraw from savings. In one example, a retiree needed $53,000 annually. With $28,000 coming from Social Security, and the remaining $25,000 split between a traditional IRA and Roth IRA, the retiree owed zero federal income tax.

The key? Understanding the tax differences between income types:

• Social Security is only partially taxable
• Roth IRA distributions are tax-free
• Traditional IRA and pension income is fully taxable

Tax strategy matters as much as total income.

How Big Does Your Portfolio Need to Be?
Enter the 4% rule: a classic rule of thumb in retirement planning. If you need $35,000 per year from your portfolio, divide by 4%. That means you’d need $875,000 saved.

Want to be more aggressive? A 5.5% withdrawal rate lowers the need to $700,000, but increases the risk of running out of money. It’s essential to tailor this rate to your actual circumstances—factoring in market conditions, longevity, and risk tolerance.

Why Nuance Is Everything in Retirement Planning
Real life isn’t linear. Retirement income often starts unevenly. For example, you might delay Social Security until age 70, so you’ll need to withdraw more in the early years and less later.

Similarly, expenses fluctuate. You might spend more in early retirement traveling, and less later—except when healthcare costs start to climb.

Other considerations include:

• Taxes on pensions and Social Security
• The financial impact of a spouse’s death (for example, Social Security may drop from $6,000 to $3,000/month for the survivor)
• Health care inflation, which can erode your budget faster than you expect

Final Thoughts: Plan With Precision, Live With Confidence
Whether you’re using a top-down shortcut or a bottom-up budget, the key is clarity. Know what you’ll spend. Know where your income will come from. And know how big your portfolio needs to be to support your retirement goals—factoring in taxes, timing, and personal risk.

The bottom line? A successful retirement plan doesn’t rely on luck—it relies on math. And the earlier you run the numbers, the better prepared you’ll be to make the most of your freedom years.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

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