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Empower Retirement Income Formula:
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The Empower Retirement Income formula calculates estimated retirement income based on portfolio value, withdrawal rate, and inflation adjustment. This helps retirees plan sustainable withdrawal strategies.
The calculator uses the retirement income formula:
Where:
Explanation: The equation accounts for portfolio value, sustainable withdrawal rate, and inflation's impact on purchasing power.
Details: Accurate retirement income estimation is crucial for financial planning, ensuring savings last throughout retirement while maintaining desired lifestyle.
Tips: Enter portfolio value in USD, withdrawal rate as decimal (e.g., 0.04 for 4%), and expected annual inflation adjustment in USD. All values must be valid (portfolio > 0, rate between 0-1).
Q1: What is a safe withdrawal rate?
A: The traditional "4% rule" suggests 4% initial withdrawal adjusted for inflation annually, but optimal rates vary by portfolio composition and market conditions.
Q2: How should I account for inflation?
A: Use historical average (2-3%) or personal expectations. The inflation adjustment represents expected annual increase in withdrawals to maintain purchasing power.
Q3: Does this account for taxes?
A: No, this calculates gross income. Net income will depend on tax treatment of withdrawals from different account types (taxable, tax-deferred, Roth).
Q4: What portfolio value should I use?
A: Use your total investable retirement assets. Exclude home equity unless planning to downsize and use proceeds for income.
Q5: How often should I recalculate?
A: Annually at minimum, or when significant changes occur in portfolio value, spending needs, or inflation expectations.