Retirement Income Gap Estimator

How much income do you really need from your portfolio? Less than your total spending, and the difference is the only number that matters. Your guaranteed income covers part of the bill on its own. The gap is what your savings have to produce, and that gap, not your spending, drives the whole plan.

People anchor on the wrong figure. They hear “I spend $200,000 a year” and brace for a portfolio that has to throw off $200,000. But Social Security and a pension show up whether the market is up or down. Subtract them, and what’s left is the real assignment. Get the gap right and every other decision, how much to hold in cash, how aggressively to invest, when to claim, gets easier.

The decision this settles

The gap is the bridge between your spending and your sure-thing income. It tells you what your portfolio is actually on the hook for, which tells you whether your savings can support your life. A retiree with a $40,000 gap and $3M saved is in completely different shape than one with a $150,000 gap and the same $3M. Same net worth, different reality, because the gap is different.

It also reframes the claiming and pension decisions. Every dollar you can turn into guaranteed lifetime income is a dollar of gap your portfolio no longer has to cover through a bad market.

How the math works

Two stacks, and the difference between them.

• Total annual spending. Everything. Fixed bills, discretionary spending, travel, taxes, the irregular stuff amortized into a yearly figure.
• Guaranteed income. Income that arrives regardless of markets. Social Security, pensions, annuity payouts, reliable rental income.

Income gap = total spending − guaranteed income.

That gap, divided by your portfolio, is your required withdrawal rate, and it’s the number to stress-test. A 3% gap against your portfolio is sturdy. A 7% gap is fragile, and no clever investing fixes a withdrawal rate that high for long.

A worked example

A couple spends $160,000 a year. One spouse claims close to the maximum Social Security benefit, $4,152 a month at full retirement age for 2026, and the other adds a benefit of about $2,000 a month, for roughly $74,000 a year combined.

$160,000 − $74,000 = an $86,000 income gap.

Against a $3M portfolio, that’s a 2.9% withdrawal rate. Sturdy. Against a $1.5M portfolio, the same gap is 5.7%, which is a different conversation entirely. The gap didn’t change. The cushion did.

Now watch what the claiming decision does to the gap. If that larger Social Security benefit grows by delaying the claim, every added dollar shrinks the gap permanently and shrinks it with an inflation-adjusted, market-proof dollar. That’s why when to claim Social Security is really a question about how big a gap you want your portfolio to carry for the rest of your life.

The part most people miss

The gap isn’t one number. It moves, and the second-order effects are where plans break. Spending often runs higher early in retirement, the go-go years of travel and projects, then drifts down before climbing again on healthcare late in life. Guaranteed income shifts too. The first delayed retirement credit hasn’t kicked in yet, a pension may not be inflation-adjusted, and the day one spouse dies the household keeps only the larger Social Security check and loses the smaller one.

That last point catches people. A surviving spouse often faces a gap that jumps overnight, because one benefit disappears while most of the spending stays. A gap estimate that assumes today’s income forever is a snapshot of the easy years. The expensive mistake is planning to the snapshot.

The fix is to estimate the gap across the whole arc, not just year one. Pair it with a tax-efficient withdrawal order so the dollars filling the gap cost you the least in tax. Know your gap, watch how it moves, and your portfolio finally has a job it can actually do.