Retirement Calculator: Plan With Real Market & Social Security Data

Historical Investment Returns (US Market)

When planning for retirement, you need to understand how your investments might grow over time. Historical performance data gives us valuable benchmarks based on how different investments have behaved over extended periods.

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flowchart TB
    A[US Large Cap Stocks] --> |"Avg. Nominal Return\n10-11%\nAvg. Real Return\n6-8%"| B[Highest Returns]
    C[Balanced Portfolio\n60% Stock/40% Bond] --> |"Avg. Nominal Return\n7-9%\nModerate Risk & Return"| D[Moderate Growth]
    E[US Aggregate Bonds] --> |"Avg. Nominal Return\n1.5-6%\nLower Volatility"| F[Most Stable]
    
    subgraph Investment Performance Key
    B --> |"Long-term Growth" | G[Highest Potential]
    D --> |"Balanced Approach" | H[Moderate Potential]
    F --> |"Capital Preservation" | I[Lower Potential]
    end

Remember though—these are long-term averages reflecting past conditions. They don't guarantee or predict future results. Your actual investment returns can vary significantly from year to year and depend heavily on when you're investing.

US Stocks (Large Cap - S&P 500 Index)

The S&P 500 represents a broad basket of large US companies and serves as a common proxy for the overall US stock market.

Historically, over very long time horizons (since the late 1920s or mid-1950s), the S&P 500 has delivered average annual nominal returns (including reinvested dividends) of approximately 10% to 11%.

But here's where inflation enters the picture. Those impressive nominal returns get significantly reduced when accounting for inflation's impact on purchasing power. The average annual real return (adjusted for inflation) over similar long periods has historically been closer to 6% to 8%. This difference highlights why accounting for inflation in your long-term projections is crucial.

Average returns also fluctuate depending on which multi-decade period you examine, reflecting the cyclical nature of markets with their bull and bear phases. For example, approximate nominal average annual returns for the S&P 500 ending around 2024 have been:

• 10-Year Period: ~11.0% - 11.3%
• 20-Year Period: ~8.4% - 8.9%
• 30-Year Period: ~9.0% - 9.3%

These variations demonstrate that while long-term averages provide context, the specific sequence of returns you experience during your investment period heavily influences your outcome. Major economic events—like the high inflation of the 1970s, the dot-com bubble burst of the early 2000s, or the 2008 financial crisis—significantly impacted returns during those specific eras.

US Bonds (Aggregate Bond Market)

US aggregate bond indices typically measure the performance of investment-grade US government bonds, corporate bonds, and mortgage-backed securities.

Historically, bonds have offered lower returns than stocks but have generally exhibited less volatility. Average annual nominal returns for broad US aggregate bond indices have typically ranged from 1.5% to 6% over long periods, though performance is highly sensitive to the prevailing interest rate environment and the specific timeframe measured.

For instance, the 10-year average annual nominal return for the widely tracked Bloomberg US Aggregate Bond Index was reported around 1.46% in early 2025 data. This relatively low figure reflects a period that included significant bond market downturns driven by rising interest rates. Data from earlier periods or different bond market segments might show higher historical averages.

Balanced Portfolios (e.g., 60% Stock / 40% Bond)

Portfolios combining stocks and bonds aim to balance the growth potential of stocks with the relative stability of bonds.

Historical average annual nominal returns for balanced portfolios typically fall between those of 100% stock and 100% bond allocations. Depending on the specific mix and time period, long-term average returns have often been in the 7% to 9% range.

For example, one analysis of a Vanguard fund approximating a 60% US stock / 40% US bond mix showed a 10-year annualized return of 8.6% ending September 2024. Another data point for the same fund showed a 10-year return of 7.78% as of March 2025. Historical simulations suggest average returns vary with allocation, such as 7.2% for a 20% stock/80% bond mix versus 9.1% for a 60% stock/40% bond mix.

The specific allocation between stocks and bonds significantly drives both the potential return and the level of risk (volatility) experienced by the portfolio.

Historical Long-Term Average Annual Investment Returns (US Market)

Note: Ranges are based on long-term historical averages (typically 30+ years) and are illustrative. Actual returns vary significantly. Real returns are adjusted for inflation.

Historical Inflation Rates (US)

Inflation is the silent factor that can dramatically transform your retirement plans. It represents the rate at which the general level of prices rises, steadily eroding your purchasing power over time.

Understanding historical inflation patterns is essential for two key reasons: it helps you interpret investment returns (distinguishing nominal gains from real purchasing power gains) and allows you to project the future cost of living during your retirement years. The Consumer Price Index for All Urban Consumers (CPI-U) serves as the standard measuring stick for inflation in the United States.

Long-Term Average

Based on CPI-U data extending back over a century (1914-2024), the average annual inflation rate in the US has been approximately 3.1% to 3.3%.

That seemingly modest percentage masks significant variability over time.

Historical Variability

Inflation rates have fluctuated dramatically through different economic eras. The US has experienced periods of very high inflation, such as during and after World War I, the 1940s, the 1970s and early 1980s (when it reached double digits), and more recently in 2021-2022.

On the flip side, there have been periods of very low inflation or even deflation (falling prices), notably during the Great Depression of the 1930s and briefly in 2009.

Averages Over Different Recent Eras

Calculating averages over different multi-decade periods reveals variations influenced by these cycles:

• Average Annual Inflation (Approx. 1994-2023, 30 years): ~2.5%
• Average Annual Inflation (Approx. 1974-2023, 50 years): ~3.8%

Impact on Purchasing Power

Even seemingly moderate inflation rates have a substantial cumulative effect over a long retirement horizon due to compounding.

For example, an average inflation rate of 3% per year implies that the cost of living would roughly double in approximately 24 years. Over a 30-year retirement, prices would increase by approximately 143% (1.03^30 ≈ 2.43), meaning it would take $2.43 at the end of the period to buy what $1.00 bought at the beginning.

This demonstrates why accounting for inflation in retirement expense projections is critical. Relying solely on recent inflation experience, whether high or low, can be misleading when planning for decades into the future; the long-term historical trend provides important context.

Historical US Average Annual Inflation Rates (CPI-U)

Note: Based on historical Consumer Price Index for All Urban Consumers (CPI-U) data. Rates are approximate averages over the specified periods.

Estimated Retirement Healthcare Costs (US)

Healthcare expenses represent one of the most significant—and often underestimated—financial considerations for retirees in the United States, even with Medicare coverage.

Estimating these costs is complex because actual expenditures depend on so many variables: your individual health status, chosen insurance coverage (including supplemental plans), geographic location, income level, longevity, and whether you need long-term care (like nursing homes or assisted living).

Various organizations provide estimates, but their methodologies and inclusions differ, leading to a range of potential figures.

Average Lifetime Estimates (Including Medicare Premiums & Out-of-Pocket Costs)

Some estimates attempt to capture the total expected healthcare spending over a retiree's lifetime.

Fidelity Investments estimated that an average individual retiring at age 65 in 2024 could expect to spend $165,000 on healthcare throughout retirement. This figure assumes enrollment in traditional Medicare Parts A, B, and D, and covers estimated premiums and out-of-pocket costs for services covered by these parts. It does not typically include costs like long-term care or most dental and vision care. This estimate has more than doubled since Fidelity began tracking it in 2002 and was up from $157,500 in 2023.

Research indicates that many individuals significantly underestimate these costs, often expecting to spend less than half of such estimates.

Typical Annual Cost Estimates

Other analyses focus on estimating typical annual expenses.

A model developed by Vanguard and Mercer Health & Benefits projected that a typical 65-year-old woman with average health, purchasing a Medicare Supplement Plan G and a standard prescription drug plan, could expect annual healthcare costs (premiums and out-of-pocket) of around $5,100 in 2020.

This model also highlighted substantial variation based on health risk. For a 65-year-old woman in 2020 using Original Medicare plus a Part D plan, median annual costs ranged from approximately $3,100 (low health risk) to $4,000 (medium risk) to $5,700 (high risk), with potential costs significantly higher at the upper end of the distribution for each risk category.

Out-of-Pocket Spending Estimates (Excluding Premiums)

Research focusing specifically on out-of-pocket costs (excluding insurance premiums) reveals important distribution patterns.

An Employee Benefit Research Institute (EBRI) study analyzing actual retiree spending after age 70 (reported in 2015 dollars) found that the median cumulative out-of-pocket spending from age 70 until death was relatively modest, around $27,000 for those living to age 95 or beyond.

However, the distribution of these costs was highly skewed. The same study found that the 90th percentile of cumulative out-of-pocket spending reached nearly $172,000, and the 95th percentile exceeded $269,000 for the longest-lived group. This indicates that while many retirees may have manageable out-of-pocket expenses, a significant minority faces potentially catastrophic costs.

Nursing home expenses were identified as a primary driver of these high tail-end costs. While the median out-of-pocket nursing home expense was zero (meaning most people did not incur such costs), the 95th percentile exceeded $175,000 for those dying at age 95+. Gender differences are also notable, with women generally living longer, being more likely to enter nursing homes, and facing higher lifetime healthcare costs.

The wider range in estimates underscores that planning for healthcare in retirement requires considering more than just an average figure. The potential for very high costs, particularly related to long-term care needs or chronic conditions, means that risk management strategies may be as important as planning for average expected expenses.

Estimated Lifetime Retirement Healthcare Cost Ranges (Per Individual, Age 65 Retirement)

Note: Estimates vary based on methodology, year, included costs, health status, and longevity. Figures are per individual.

Social Security Benefit Estimates (US)

Social Security provides a crucial income foundation for the majority of retirees in the United States. Your benefit amount is primarily determined by two key factors: your lifetime earnings history and the age at which you choose to begin receiving benefits.

Calculation Basis

Benefits are calculated based on your highest 35 years of earnings, adjusted or "indexed" to account for changes in national average wage levels over your career. This process yields your Average Indexed Monthly Earnings (AIME).

A progressive formula is then applied to the AIME using specific dollar thresholds called "bend points" (which change annually) to calculate your Primary Insurance Amount (PIA). The PIA represents the benefit amount payable at your Full Retirement Age (FRA).

The formula is designed to be progressive, meaning it replaces a higher percentage of pre-retirement earnings for lower-wage workers compared to higher-wage workers.

Full Retirement Age (FRA) and Claiming Age Impact

The FRA is the age at which you qualify for your full, unreduced PIA benefit. FRA varies based on birth year, gradually increasing from 65 for those born before 1938 to 67 for those born in 1960 or later.

You can claim retirement benefits as early as age 62, but doing so results in a permanent reduction in your monthly benefit amount compared to the PIA. The reduction is approximately 25% to 30%, depending on your FRA.

Conversely, delaying benefits beyond FRA results in Delayed Retirement Credits (DRCs), which permanently increase your monthly benefit amount. For individuals born after 1942, these credits accrue at a rate of 8% per year of delay, up to age 70.

Claiming benefits at age 70 can result in a monthly payment significantly higher (potentially over 75% higher) than claiming at age 62. This makes the claiming age decision a critical factor in retirement income planning.

Illustrative Benefit Ranges (Based on 2024/2025 Data)

Actual benefits vary widely based on individual earnings records. The following provides general estimates:

Average Retired Worker: The average monthly benefit paid to retired workers was approximately $1,862 to $1,920 in late 2024.

Low Earner (e.g., 45% of average wage): For someone retiring at age 65 in 2024, Social Security might replace around 50% of their pre-retirement earnings, translating to an estimated annual benefit near $15,500.

Average Earner: For someone with average career earnings retiring at age 65 in 2024, benefits might replace approximately 39% of their pre-retirement earnings.

High Earner (e.g., 160% of average wage): For a higher earner retiring at age 65 in 2024, benefits might replace around 33% of pre-retirement earnings, providing an estimated annual benefit near $33,800.

Maximum Earner (Consistently earned at or above the maximum taxable wage base): The maximum initial monthly benefit depends heavily on claiming age. For someone claiming in 2024:

• Claiming at Age 62: $2,710
• Claiming at FRA (e.g., 67): $3,822
• Claiming at Age 70: $4,873

For many retirees, Social Security represents a substantial portion of their total income, often 50% or more, highlighting its importance in financial security.

Estimated Monthly Social Security Retirement Benefits (Illustrative Examples Based on 2024/2025 Data)

Note: These are simplified estimates for illustrative purposes. Actual benefits depend on an individual's complete earnings record and the year they claim. FRA is assumed to be 67 for comparison. Amounts are approximate and subject to change.

Sustainable Withdrawal Rates (SWRs)

A central challenge in retirement planning is determining how much money you can safely withdraw from your investment portfolio each year without running out too soon.

Research in this area often focuses on identifying a "safe withdrawal rate" (SWR), typically expressed as the initial percentage of your portfolio's value that you can withdraw in the first year of retirement, with that dollar amount subsequently adjusted for inflation each year.

The "4% Rule" Origin

Foundational research by William Bengen in 1994, published in the Journal of Financial Planning, analyzed historical US market data (stocks and bonds) from 1926 onwards.

His analysis indicated that an initial withdrawal rate of 4%, with subsequent annual withdrawals adjusted for inflation, had historically been sustainable over a 30-year retirement period for portfolios with significant stock allocations (e.g., 50% to 75% stocks), even when starting retirement in challenging market periods.

This became widely known as the "4% rule" and serves as a common starting point or benchmark for retirement planning.

Factors Influencing SWRs

The sustainability of any given withdrawal rate is influenced by several key factors:

Investment Returns: Higher long-term portfolio returns generally support higher withdrawal rates. Conversely, periods of low returns, especially early in retirement (sequence of return risk), can jeopardize sustainability.

Inflation: Higher inflation erodes the purchasing power of withdrawals and requires larger nominal withdrawals over time to maintain a constant standard of living.

Portfolio Allocation: The mix between stocks and bonds impacts both potential returns and volatility. Bengen's research suggested a range of stock allocations could support the 4% rate.

Retirement Duration: Longer retirement periods require lower initial withdrawal rates to ensure funds last.

Withdrawal Strategy: The assumption of fixed, inflation-adjusted withdrawals is conservative. Flexible strategies may allow for different outcomes.

Current Research and Considerations

Ongoing research continues to evaluate and refine SWR concepts:

Some recent studies, incorporating forward-looking capital market assumptions (often projecting lower future returns than historical averages due to factors like high equity valuations or low bond yields), have suggested that safe starting withdrawal rates might be lower than 4%, potentially in the 3.3% to 3.8% range, depending on the specific year's analysis and desired probability of success.

Conversely, other analyses argue that the historical 4% rule remains robust precisely because it was derived from periods including worst-case historical return sequences, and that current conditions, while potentially challenging, fall within the range the rule was designed to withstand.

Research also highlights that the standard assumption of constant, inflation-adjusted spending throughout retirement may not reflect reality. Studies show that real spending often tends to decline later in retirement. Incorporating such declining spending patterns into SWR models could potentially justify higher initial withdrawal rates, perhaps in the 4.3% to 4.8% range.

Flexible withdrawal strategies—such as forgoing inflation adjustments in years following significant portfolio losses, setting upper and lower limits ("guardrails") on withdrawal amounts, or linking withdrawals to required minimum distribution formulas—can potentially allow for higher average lifetime income compared to a rigid fixed withdrawal approach, albeit with more year-to-year variability.

It's also noted that in the majority of historical scenarios, rigidly applying the 4% rule resulted in retirees finishing the 30-year period with substantial wealth remaining, often several times their initial principal, suggesting the rule is conservative in average or favorable market conditions.

In summary, while the 4% rule provides a useful historical benchmark, the appropriate withdrawal rate for an individual depends on their specific circumstances, risk tolerance, time horizon, and flexibility regarding spending adjustments. Current research suggests potential safe starting rates may range from the low 3%s to the mid-to-high 4%s, depending heavily on the underlying assumptions about future returns and retiree spending behavior.

Federal Taxation of Retirement Income Sources (US)

The way different sources of retirement income are taxed at the federal level significantly affects the net amount available to you as a retiree. Understanding these rules is crucial for accurate income planning.

Key sources include Social Security benefits, withdrawals from traditional retirement accounts (like 401(k)s and IRAs), and withdrawals from Roth accounts. Note that state taxation rules vary and aren't covered here.

Social Security Benefits

Taxability depends on your "combined income," calculated as Adjusted Gross Income (AGI) plus any non-taxable interest income plus 50% of the Social Security benefits received for the year.

pie title .........Monthly Social Security Benefit by Claiming Age 
    "Age 62: $1,450" : 1450
    "Age 67 (FRA): $2,000" : 2000
    "Age 70: $2,550" : 2550

Based on 2024 thresholds (which may adjust annually), benefits are generally:

• 0% Taxable: If combined income is below $25,000 (single filers) or $32,000 (married filing jointly).
• Up to 50% Taxable: If combined income is between $25,000-$34,000 (single) or $32,000-$44,000 (joint).
• Up to 85% Taxable: If combined income exceeds $34,000 (single) or $44,000 (joint).

Specific rules apply for those married filing separately. Supplemental Security Income (SSI) payments are not taxable. Taxpayers can request voluntary withholding from their benefits using Form W-4V.

Traditional 401(k) / Traditional IRA Withdrawals

Distributions derived from pre-tax contributions and all investment earnings are generally taxed as ordinary income at your applicable federal income tax rate in the year the withdrawal is made.

Withdrawals taken before age 59½ are typically subject to an additional 10% early withdrawal penalty tax on the taxable amount, unless a specific exception applies. Common exceptions include death, total and permanent disability, distributions made as part of a series of substantially equal periodic payments, certain medical expenses exceeding 7.5% of AGI, withdrawals due to an IRS levy, and others. Hardship itself is not an exception for IRAs, though some hardship distributions may qualify under other exceptions like medical expenses.

Required Minimum Distributions (RMDs) generally must begin from these accounts starting in the year you turn age 73 (this age was increased from 72 and 70½ by the SECURE Acts). RMDs are calculated annually based on the prior year-end account balance and a life expectancy factor from IRS tables. Failure to take the correct RMD amount by the deadline can result in a penalty, currently 25% of the shortfall (reduced to 10% if corrected timely within two years).

Roth 401(k) / Roth IRA Withdrawals

Qualified distributions from Roth accounts are entirely federal income tax-free (both contributions and earnings).

To be qualified, a distribution must meet two conditions: 1) The account must have been open for at least five taxable years (starting from the first contribution), AND 2) The distribution must be made on or after reaching age 59½, or due to death or disability. (Roth IRAs have an additional qualifying reason for first-time home purchases, up to $10,000).

Withdrawals from a Roth IRA that are not qualified distributions are treated as coming first from contributions (basis). Since contributions were made with after-tax money, withdrawals of contributions are always tax-free and penalty-free. Only once all contributions have been withdrawn are earnings tapped; withdrawals of earnings before meeting the qualified distribution criteria are generally taxable and may be subject to the 10% early withdrawal penalty.

Non-qualified distributions from Roth 401(k)s are typically prorated between tax/penalty-free contributions and potentially taxable/penalized earnings.

RMD Rules: Roth IRAs have no lifetime RMD requirement for the original account owner. Effective January 1, 2024, due to the SECURE 2.0 Act, designated Roth accounts within employer-sponsored plans (like Roth 401(k)s) are also exempt from lifetime RMDs for the original owner. RMD rules do apply to beneficiaries after the owner's death for both Roth IRAs and Roth 401(k)s.

Holding assets across these different tax treatments (taxable, tax-deferred, tax-free) can provide valuable flexibility for managing your overall tax liability in retirement. The choice between traditional and Roth contributions during working years depends on your assessment of your current versus expected future tax rates.

Life Expectancy Statistics (US)

Estimating how long your retirement might last is a critical component of financial planning. After all, your savings need to provide income for your entire lifetime—however long that may be.

Life expectancy statistics, typically provided by agencies like the Social Security Administration (SSA) and the Centers for Disease Control and Prevention (CDC), offer average projections based on current age, sex, and recent mortality data.

Remember that these are statistical averages, and individual lifespans can vary significantly from these projections.

Period Life Expectancy

These figures represent the average number of additional years a person of a specific age could expect to live if current mortality rates for each age group remained constant for the rest of that person's life.

Average Remaining Life Expectancy at Age 65

Based on recent data (e.g., 2021-2022 final or provisional data from CDC and SSA):

• Males: Approximately 16.9 to 17.5 years remaining (suggesting an average lifespan to age 81.9 - 82.5).
• Females: Approximately 19.5 to 20.2 years remaining (suggesting an average lifespan to age 84.5 - 85.2).
• Both Sexes Combined / Unisex: Approximately 18.3 to 18.9 years remaining (suggesting an average lifespan to age 83.3 - 83.9).

(Note: Minor variations between sources and years reflect differences in datasets and calculation timing.)

Gender Differences

Data consistently shows that females reaching age 65 have a longer average remaining life expectancy than males, typically by about 2.5 to 3 years. This has implications for planning, particularly for couples and surviving spouses.

Using Averages in Planning

While averages provide a baseline, relying solely on them can be risky. A significant portion of individuals reaching age 65 will live longer than the average life expectancy.

For example, based on SSA's 2021 period life table, roughly 44% of males and 55% of females reaching age 65 are projected to live to age 85 or beyond. Therefore, retirement planning often incorporates horizons that extend beyond the simple average to account for longevity risk.

Historical Context

Life expectancy at age 65 has increased substantially over the history of the Social Security program. In 1940, remaining life expectancy at 65 was around 12-13 years, compared to the 17-20+ years seen today.

Average Remaining Life Expectancy at Age 65 (US, Period Data)

Note: Based on period life tables, reflecting mortality conditions in the specified year. Actual individual lifespans vary. Unisex figures from SSA may differ slightly from CDC combined figures due to weighting methodology.

Conclusion

Numbers tell stories. And the data presented here—from market returns to healthcare costs to life expectancy—tells yours.

These aren't just abstract figures. They're the building blocks of your future financial independence.

What makes retirement planning challenging isn't just the math—it's the uncertainty. Markets fluctuate. Inflation ebbs and flows. Healthcare costs surprise us. And nobody knows exactly how long they'll live.

Yet armed with these benchmarks, you can navigate that uncertainty with confidence rather than fear.

The difference between a comfortable retirement and a stressful one often comes down to understanding these fundamentals before you need them.