How the Retirement Simulator Models Your Plan

This page documents how the simulator on the Retirement page turns your inputs into a projection, with the cases that most often need care: plans that start in retirement, benefits already in payment, couples, and work that continues after leaving a main job. For the general idea of Monte Carlo simulation, see the Monte Carlo guide.

What the Simulator Does Each Month

Each simulated path draws a return for every month from the capital market assumptions under Markets. For a portfolio balance $B_t$ in month $t$:

• $r_t$ is that month’s portfolio return, after fees.
• $c_t$ is your monthly saving, added only before your retirement age and placed in your accounts within contribution limits.
• $w_t = \max(S_t - I_t,\, 0)$ is the withdrawal: spending $S_t$ from your spending policy, less income $I_t$ from Social Security, pensions and work. Money drawn from a traditional account is grossed up by your tax rate so the after-tax amount covers spending.
• $s_t = \max(I_t - S_t,\, 0)$ is income above spending, deposited into a taxable account.

Spending, Social Security and work income are in today’s dollars and rise with each path’s simulated inflation. The success rate is the share of paths whose balance stays above zero in every month from the first retired month to your plan-to age. It measures whether the portfolio lasts; income streams keep paying whether or not it does.

Retirement Age, and Plans That Start in Retirement

Your retirement age is when withdrawals begin. A retirement age at or below your current age means you have already retired: the first simulated month already draws on the portfolio and nothing more is saved, whatever the Saving slider held. The age itself still matters for your records (when you retired), but any past retirement age produces the same projection.

On the Retirement page, turn on Already retired. The retirement slider becomes Retired at, the Saving row disappears, and the current-age slider runs to 100. In Settings, enter the age you retired; Settings accepts any retirement age as long as the plan-to age is later than both your current age and your retirement age.

If you previously set a retirement age one year in the future to get a projection to run, switch to Already retired. The one-year workaround models twelve months of saving and twelve months without withdrawals that never happen, so it reads better than your real plan.

Social Security You Already Receive

If your claiming age is at or below your current age, the benefit is treated as already being paid and starts in the first month. Enter the monthly amount you receive today. The simulator raises it with its inflation assumption each year, which stands in for the annual cost-of-living adjustment. The actual adjustment follows the CPI-W, measured from the third quarter of one year to the third quarter of the next,¹ so a run with a higher or lower inflation assumption under Markets doubles as a test of a higher or lower COLA path.

A Spouse’s Social Security and the Survivor Scenario

Under Other income, a spouse’s benefit has its own timeline: the monthly amount in today’s dollars, the spouse’s current age, and the age they claim or claimed. The simulator shifts the spouse’s ages onto yours by the age gap, so a spouse three years younger who claims at 67 starts receiving benefits when you are 70. A claiming age at or below the spouse’s current age starts now.

Enter the benefit the spouse will actually receive. Social Security pays a spouse their own benefit first and adds a spousal amount only if it is higher; the spousal amount is at most half of the worker’s benefit at full retirement age.² The simulator does not compute that top-up for you, so use the larger of the two figures from the spouse’s Social Security statement.

The survivor scenario models the first death in a couple at an age you choose, at or after your retirement age. From that month the deceased’s benefit stops and the survivor keeps the larger of their own benefit and the survivor benefit, which follows Social Security’s rule of paying the higher amount rather than both.³ You also set household spending after the death as a share of the couple’s spending.

Work Income in Retirement: Part-Time Work and Staggered Couples

Many people do not stop working all at once. In the Health and Retirement Study, nearly half of retirees followed a path that involved partial retirement or a return to work, and at least a quarter later unretired.⁴ Couples add another version of the same pattern: one partner retires while the other keeps earning.

Work income in retirement, under Other income, covers both. Enter take-home pay per month, the age it starts and the age it stops, all on your own age axis. For a spouse’s pay, the end age is the age you will be when they stop working. The pay rises with inflation and offsets spending; whatever exceeds spending is invested in a taxable account. Saving still stops at your retirement age, so the same paycheck is never counted both as savings and as income.

A worked example in round numbers: a household spends $7,000 a month. One partner has retired and receives $2,400 a month of Social Security; the other takes home $5,500 a month for three more years. Income is $7,900, so for those three years the portfolio receives $900 a month instead of paying out. When the paycheck stops, the portfolio funds $4,600 a month until the second Social Security benefit begins. Earlier versions of the simulator dropped that $900 surplus from the projection.

Pensions

A pension has a start age, an end age and a switch for whether it rises with inflation. Off, it pays a fixed dollar amount, as most private pensions do. For a pension that has already started, enter today’s payment; for one that has not, enter the amount your statement shows at the start age.

How to Check What Ran

Under the results, the section that lists the run’s assumptions includes an Income group built from the request that produced the numbers: whether the plan starts retired, each income stream with its amount, ages and indexing, and how income above spending was treated. If a figure surprises you, start there.

What the Simulator Does Not Model

• Required minimum distributions are not enforced. The simulator uses a flat effective tax rate, and in that mode it does not force withdrawals at the RMD age, which is 73 for people born from 1951 through 1958 and 75 for people born in 1960 or later.⁵ The Health page’s Roth tools model RMDs.
• Income streams are treated as after tax. Work income should be entered as take-home pay. Social Security is not taxed in the projection, though up to 85% of it can be taxable income once other income passes the IRS thresholds.⁶
• Work income is certain. The projection does not model losing a job early, and 401(k) deferrals from a working spouse are not tracked separately; reduce the take-home figure if you want them left out.
• A death before retirement is not modeled, because it would also stop wages and savings.
• The instant preview simplifies. While you move a slider, an in-browser preview with yearly steps updates first; it leaves out a spouse’s benefit and the survivor scenario. The full simulation replaces it within seconds.

Frequently Asked Questions

I retired years ago. What retirement age should I enter?

The age you retired. Any age at or below your current age is treated as already retired, and the projection is the same whichever past age you choose.

My spouse already claims Social Security and I have not claimed yet. How do I enter that?

Put your own benefit and claiming age in the Social Security sliders. Under Other income, enter your spouse’s current benefit, their current age, and the age they claimed. Their benefit starts in the first month; yours starts at your claiming age.

How do I model working part-time for a few years after retiring?

Turn on Already retired (or set your retirement age to when you leave your main job), then add Work income in retirement with your expected take-home pay and the ages it starts and stops.

Why did my success rate rise when I added work income that exceeds my spending?

Income above spending is invested in a taxable account, so the portfolio grows during those years instead of shrinking, and it starts the later years larger.

Does the simulator model the spousal top-up or the survivor benefit for me?

The survivor scenario computes the survivor benefit from the two records. The spousal top-up during both lifetimes is not computed: enter the larger of your spouse’s own benefit and their spousal benefit.

Related Guides

• Monte Carlo Retirement Simulation explains the method behind every projection on this page.
• When to Claim Social Security covers the claiming-age decision the spouse and survivor inputs depend on.
• Retirement Income Floor looks at covering essential spending with guaranteed income.
• Sequence of Returns Risk explains why the first years of withdrawals matter most, which is where a plan that starts in retirement begins.

Key Takeaways

• A retirement age at or below your current age means already retired: withdrawals start in the first month and nothing more is saved.
• Enter benefits and pensions already in payment at today’s amounts; they rise with the inflation assumption from here.
• A spouse’s benefit runs on its own timeline, and the survivor scenario keeps the larger of the two benefits after the first death.
• Part-time pay and a still-working spouse’s pay go in as work income; income above spending is invested.
• The Income group under the results shows exactly which streams and ages a run used.

Sources

1. Social Security Administration. Latest Cost-of-Living Adjustment. The COLA equals the increase in the CPI-W from one third-quarter average to the next.
2. Social Security Administration. Can I collect Social Security spouse’s benefits and my own retirement benefits? and Do You Qualify for Social Security Spouse’s Benefits?. Own benefit paid first; spousal benefit up to 50% of the worker’s full-retirement-age benefit.
3. Social Security Administration. If You Are the Survivor. A survivor eligible for both receives the higher amount, not both.
4. Maestas, N. (2010). Back to Work: Expectations and Realizations of Work after Retirement. Journal of Human Resources, 45(3), 718–748.
5. Internal Revenue Service. Retirement plan and IRA required minimum distributions FAQs. RMD starting ages under SECURE 2.0.
6. Internal Revenue Service. Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Up to 50% of benefits taxable generally; up to 85% above the higher income thresholds.