How to Use the Nectarine Retirement Calculator
The Nectarine Retirement Calculator helps you understand your financial readiness for retirement by comparing your future retirement income to your current spending power. Here's how to use it effectively and understand what the results mean.
Getting Started
Basic Information
- Current Age: Your current age
- Target Retirement Age: When you plan to retire
- State: Your state of residence (for tax calculations)
- Annual Pre-Tax Income: Your current salary before taxes
Investment Information
- Investment Mode: Choose between "Simple" or "Advanced"
- Simple Mode: Enter your total current investments and annual savings
- Advanced Mode: Break down your investments by account tax type (Traditional, Roth, or Taxable Brokerage)
Current Investments
- Current Total Invested: Your total portfolio value today
- Traditional: Pre-tax retirement accounts (Traditional 401k, Traditional IRA)
- Roth: Post-tax retirement accounts
- Taxable Brokerage: Regular investment accounts
Annual Savings
- Annual Savings: How much you save each year (in Simple mode)
- Annual Roth Savings: Yearly contributions to Roth accounts
- Annual Traditional Savings: Yearly contributions to pre-tax accounts
- Annual Taxable Savings: Yearly contributions to regular brokerage accounts
Understanding Your Results
Chance of Success
Your chance of success is based on the results of the Trinity Study which looks at the historical likelihood of a portfolio of 75% stocks and 25% bonds being able to sustain your withdrawal rate for the length of retirement.
Trinity Study Raw Data Table:
This table shows the results of the trinity study. You can see the historical success rate of a 75/25 portfolio given the withdrawal rate and number of years the portfolio needs to sustain.
| Years | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | 13% | 14% | 15% |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 15 | 100 | 100 | 100 | 95 | 82 | 68 | 64 | 46 | 36 | 27 | 18 | 9 | 0 |
| 20 | 100 | 100 | 90 | 75 | 61 | 51 | 37 | 27 | 20 | 12 | 4 | 0 | 0 |
| 25 | 100 | 100 | 85 | 65 | 50 | 37 | 30 | 22 | 7 | 2 | 0 | 0 | 0 |
| 30 | 100 | 98 | 83 | 68 | 49 | 34 | 22 | 7 | 2 | 0 | 0 | 0 | 0 |
Note that the Trinity Study did not look at withdrawal rates above 12%, but for the purposes of this calculator giving more coherent results for higher withdrawl rates, those columns were added using a linear regression to extrapolate the data.
The above table was sourced from the Trinity Study white paper here.
Withdrawal Rate at Retirement Age
The withdrawal rate is the percentage of your portfolio you'll need to withdraw your first year of retirement to provide the necessary spending money. Note that social security income is ignored for purposes of the Withdrawal Rate and Chance of Success, but you can see it added After-Tax Spending Money chart.
Years to Retirement
This is the number of years between your Target Retirement Age and Max Projection Age (which is available in the advanced settings).
Monthly Spending at Retirement
If you chose "Match current spending" (in the advanced settings), your monthly spending in retirement is based on how much you have available to spend today. That's calculated as today's post tax income minus all annual savings. If you chose "An amount I choose", it simply shows your annual desired spending divided by 12.
Investment Values
- Investment at Retirement Age: Your portfolio value when you retire
- Investment at Longevity: Your portfolio value at the max projection age (to see long-term sustainability)
How Taxes Are Calculated
The calculator uses current federal and state tax brackets to provide accurate projections:
Federal Taxes
- Traditional withdrawals: Taxed as ordinary income
- Roth withdrawals: Tax-free
- Brokerage account withdrawals: Taxed as long-term capital gains (between 0% and 20% based on your income)
State Taxes
- Uses state tax brackets for your selected state
- Applies to both traditional IRA withdrawals and brokerage gains
Social Security
- Calculated based on your lifetime earnings
- Benefits start at your chosen age (62, 67, or 70)
- Early claiming (62) reduces benefits by 30%
- Delayed claiming (70) increases benefits by 24%
Tips to Improve Your Retirement Grade
1. Save More Money
Impact: Very High
- Increasing your annual savings will have a doubly effective impact of giving you more money in retirement and also implies less need for spending (if you save more of your current income)
2. Delay Retirement
Impact: High
- Working 2-3 more years allows more time for investments to grow
- Reduces the number of years you need to fund in retirement
- Can delay claiming social security benefits to receive a higher amount
3. Optimize Your Investment Strategy
Impact: Medium
- Roth vs Traditional: Roth accounts provide tax-free income in retirement
- Asset Allocation: Higher returns (but more risk) can significantly improve long-term results
- Tax-Efficient Investing: Use the right accounts for different types of investments
4. Adjust Your Withdrawal Rate
Impact: Medium
- Conservative (3%): More sustainable but lower income
- Standard (4%): Traditional "safe" withdrawal rate
- Aggressive (5%+): Higher income but higher risk of running out of money
5. Maximize Social Security
Impact: Medium
- Delay claiming: Each year you wait past 67 increases benefits by 8%
- Coordinate with spouse: Consider claiming strategies for married couples
- Work longer: Higher lifetime earnings increase your benefit
6. Reduce Current Spending
Impact: High
- Lower current spending means you need less in retirement
- Creates a double benefit: more savings + lower retirement needs
- Example: Reducing current spending by 10% could improve your grade by 5-10%
Advanced Features
Investment Mode Comparison
- Simple Mode: Quick assessment using total portfolio value
- Advanced Mode: Detailed breakdown by account type for more accurate tax projections
Rate of Return
- Conservative (5-6%): Lower risk, lower growth
- Moderate (7-8%): Balanced approach
- Aggressive (9-10%): Higher risk, higher potential returns
Inflation Rate
- Historical average: 3% per year
- Conservative estimate: 2.5% per year
- Higher estimate: 3.5% per year
Understanding the Charts
Net Worth Projection
Shows your portfolio value over time, including:
- Growth during working years
- Withdrawals during retirement
- Impact of inflation
Income Sources
Breaks down your retirement income by source:
- Investment Income: From portfolio withdrawals
- Social Security: Government benefits
- Employment Income: If you work part-time in retirement
Common Scenarios
Scenario 1: Young Professional (Age 25)
- Challenge: Low current savings, high potential
- Strategy: Focus on increasing savings rate, consider Roth accounts
- Goal: Aim for 15-20% savings rate
Scenario 2: Mid-Career (Age 40-50)
- Challenge: Balancing current needs with retirement savings
- Strategy: Maximize catch-up contributions, optimize asset allocation
- Goal: Have 3-5x annual income saved by age 50
Scenario 3: Near Retirement (Age 55-65)
- Challenge: Fine-tuning retirement readiness
- Strategy: Consider working longer, optimize Social Security claiming
- Goal: Achieve 80%+ retirement grade
Key Takeaways
- Start Early: Compound growth is your biggest ally
- Save Consistently: Regular contributions matter more than timing the market
- Understand Taxes: Tax-efficient investing can significantly improve results
- Be Flexible: Consider working longer or adjusting your retirement lifestyle
- Review Regularly: Update your plan as your situation changes
The Nectarine Retirement Calculator provides a comprehensive view of your financial future. Use it regularly to track your progress and make informed decisions about your retirement planning.