Retirement used to be simpler. You worked for 30 years, got a pension, collected Social Security, and more or less knew what your income would be. Today's picture looks completely different — most people are piecing together savings from 401(k)s, IRAs, brokerage accounts, maybe a rental property, and Social Security checks that might be about 23% lower — the shortfall the program's trustees project once the retirement trust fund is depleted around 2033 — if Congress doesn't act.
The question "will my money last?" has become genuinely complicated to answer. And yet most people try to answer it with one of two tools: a rough rule of thumb (the "4% rule") or a free retirement calculator that asks for three inputs and gives you a color-coded green/yellow/red result that's more anxiety-inducing than useful.
There's a better way to think about this — and once you model it properly, you'll either feel a lot better, or you'll know exactly what levers to pull.
Why Simple Rules of Thumb Break Down
The 4% rule — withdraw 4% of your portfolio in year one, then adjust for inflation each year — was derived from historical data and has held up reasonably well as a starting point. But it was designed for a 30-year retirement. If you retire at 55 instead of 65, you're potentially looking at a 40-year run. If you retire at 60, even a 35-year horizon pushes the limits of what that rule was designed for.
More importantly, the 4% rule ignores the biggest variables in your actual retirement picture:
Taxes. Withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income. Depending on your income and state, the top dollars you pull out can face a marginal tax rate of 22–32%. When people model "I need $80,000/year to live on," they often forget they need to pull significantly more than that from tax-deferred accounts to net $80,000 after taxes.
Social Security timing. Claiming at 62 vs. 67 vs. 70 can mean a difference of $500–$1,200/month in your monthly benefit — for life. And that decision interacts with your other income sources in complex ways, especially if you're in a phase of life where Roth conversions make sense.
Required Minimum Distributions. Starting at age 73, the IRS requires you to withdraw a minimum amount from most retirement accounts every year, whether you need the money or not. Those forced withdrawals can push you into a higher tax bracket and even cause your Medicare premiums to spike. If you haven't modeled this ahead of time, the surprise can be unpleasant.
Inflation over a long horizon. At 3% inflation, $80,000 today costs $145,000 in 20 years and $196,000 in 30 years. A flat projection of "I'll spend $80K/year" dramatically underestimates what a long retirement actually costs.
The Inputs You Actually Need to Model This Right
A useful retirement projection needs to account for all of the following:
Income Sources (and When They Start)
- Social Security — your benefit at different claiming ages, and your spouse's if applicable
- Pension if you have one
- Rental income
- Part-time work if you plan to ease into retirement rather than stop cold
The timing matters enormously. If you retire at 62 but don't claim Social Security until 67, you have a 5-year gap to bridge with portfolio withdrawals. That affects how fast you're drawing down your savings during your most-vulnerable early retirement years.
Account Types and Tax Treatment
- Traditional IRA / 401(k): contributions were pre-tax, withdrawals are fully taxable
- Roth IRA / 401(k): contributions were post-tax, withdrawals are tax-free (after age 59½)
- Taxable brokerage: only gains are taxed, and long-term capital gains rates are lower than ordinary income rates
- HSA: triple tax-advantaged if used for healthcare
The order in which you draw from these accounts can make a six-figure difference over a 30-year retirement. This is why "withdrawal sequencing" is such a hot topic in retirement planning circles.
Tax Modeling at the Federal and State Level
Federal tax brackets for 2026 top out at 37%, but most retirees sit in the 22–32% range depending on their income mix. State taxes vary wildly — from 0% in states like Florida, Nevada, and Texas, to over 9% in California and New York. Some states have special exemptions for pension income or Social Security that can meaningfully change your take-home.
Healthcare Costs
This is one of the most underestimated expenses in retirement planning. Before Medicare kicks in at 65, healthcare on the open market can cost $600–$1,500/month per person depending on your age, health, and the ACA plan you choose. And if your income is too high, you won't qualify for ACA subsidies. Modeling this as a fixed line item through age 65 and then transitioning to Medicare costs (premiums, supplemental coverage, out-of-pocket) is important.
What a Real Projection Looks Like
Let's say you're 58, married, and you're planning to retire at 62. You have:
- $1.2M in a traditional 401(k)
- $180K in a Roth IRA
- $95K in a taxable brokerage account
- Expected Social Security of $2,400/month if you claim at 67 (both spouses combined: $3,800/month)
- You live in Ohio, which taxes retirement income
Here's what a proper projection surfaces:
Ages 62–67 (Social Security gap): You need to fund 100% of expenses from your portfolio. At $85K/year in spending, you're drawing down fast — and because it's from the 401(k), you're paying Ohio + federal taxes on every dollar. Your effective tax rate during this phase might be 22–26%.
Ages 67+: Social Security kicks in, reducing portfolio draws substantially. But your 401(k) balance is now lower, which means your future RMDs are lower too — potentially a good thing.
Ages 73+: RMDs begin. Depending on your account balance at that point, you might be required to withdraw $60,000–$80,000/year whether you need it or not. This gets stacked on top of Social Security income, potentially pushing you into a higher bracket or triggering IRMAA Medicare surcharges.
Run the projection to 90 or 95. At 3% inflation, the numbers look very different by year 30 than they do in year 1. You want to stress-test your longevity risk, not just your average case.
The Roth Conversion Window Most People Miss
One of the most powerful moves available to pre-retirees is a Roth conversion strategy in the years between retiring and claiming Social Security. Here's why: if you retire at 62 and don't claim Social Security until 67, you may have 5 years of relatively low income. That creates an opportunity to convert traditional IRA / 401(k) funds to Roth at a lower tax rate than you'll face later when RMDs and Social Security kick in together.
The math here is highly individual — it depends on your state tax rate, your projected RMDs, your Social Security benefit, and your other income. But for many people, converting $30,000–$80,000/year during that window ends up saving tens of thousands in lifetime taxes.
This is the kind of insight that doesn't show up in a simple retirement calculator. It only becomes visible when you model the full 30-year picture together.
How to Actually Build This Model
You have a few options:
Option 1: Hire a fee-only financial planner. A good CFP will build a detailed projection for you and charge $2,000–$5,000 for a comprehensive plan. Worth it for high-net-worth situations or complex tax scenarios. The downside: you're dependent on someone else to run scenarios, and updating it is expensive.
Option 2: Build a spreadsheet. This is the DIY route favored by the FIRE community. It's incredibly powerful if you're comfortable with spreadsheets and willing to maintain it. The downsides: it takes 20–30 hours to build a solid model, it's brittle, and most people's spreadsheets don't properly model taxes, inflation compounding, or RMDs.
Option 3: Use a tool designed for this. Tally's lifetime forecast does exactly this — it models 50+ data columns across a multi-decade horizon, including federal and all 50 state income taxes, RMDs, Social Security timing, capital gains, FICA, inflation, and portfolio growth. You can run what-if scenarios (what if I retire 2 years earlier? what if I claim Social Security at 70 instead of 67?) and see the impact side by side.
What You're Really Trying to Answer
When people ask "will my money last?", they're really asking a cluster of related questions:
- At what age can I safely stop working?
- How much can I safely spend each year in retirement?
- In what order should I draw from my accounts?
- When should I claim Social Security?
- Should I do Roth conversions before RMDs kick in?
- How does my state's tax policy affect this whole picture?
You can't answer any of these well without modeling the others. They're interconnected. That's why "use the 4% rule and don't overthink it" leaves so many people either undershooting (working longer than they need to) or overshooting (spending down savings too fast).
Getting Started
If you haven't built a retirement projection yet, start here:
- List all your accounts and their tax treatment. Know what's pre-tax, Roth, and taxable.
- Get your Social Security estimate. Log in to ssa.gov and check your projected benefits at 62, 67, and 70.
- Estimate your annual retirement spending. Be realistic and add a 15–20% buffer for healthcare, home maintenance, and the "one more trip" effect.
- Model it. Either with a spreadsheet, a planner, or a tool — but model it. A rough guess is not the same as a projection.
The goal isn't to eliminate uncertainty — retirement planning always involves some. The goal is to replace anxiety with a clear picture of where you stand and what your options are. Once you have that, the decisions get a lot easier.
Tally's lifetime financial forecast connects directly to your accounts and models your retirement income, taxes, RMDs, and Social Security in one place. Try it free for 14 days — no credit card required — at thetally.io.