1. What is the Retirement Income Equation?

The retirement income equation calculates sustainable annual income from retirement savings (nest egg) divided by an annuity factor that accounts for life expectancy and investment returns.

2. How Does the Calculator Work?

The calculator uses the retirement income equation:

Where:

• \( Nest\ Egg \) — Total retirement savings (USD)
• \( Annuity\ Factor \) — Factor based on life expectancy and expected returns (unitless)

Explanation: The equation provides a simple way to estimate sustainable annual withdrawals from retirement savings.

3. Importance of Retirement Income Calculation

Details: Proper retirement income planning helps ensure savings last throughout retirement while maintaining desired lifestyle.

4. Using the Calculator

Tips: Enter total retirement savings in USD and appropriate annuity factor. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I determine the annuity factor?
A: The annuity factor depends on life expectancy and expected investment returns, often provided by financial planners or retirement calculators.

Q2: What's a typical annuity factor?
A: For a 30-year retirement with 4% return, the factor is about 17.29 (1/0.0578). The "4% rule" uses a factor of 25 (1/0.04).

Q3: Does this account for inflation?
A: The basic equation doesn't account for inflation. Use real (inflation-adjusted) returns in the annuity factor for inflation-adjusted income.

Q4: How often should I recalculate?
A: Recalculate annually or when your nest egg changes significantly, or when your life expectancy changes.

Q5: What are limitations of this approach?
A: It assumes constant spending and returns. Sequence of returns risk and unexpected expenses aren't accounted for.