How the retirement projection works

Beyond Payday projects your retirement by simulating your entire financial life one month at a time, from today until age 95. Every account, contribution, tax, and withdrawal is recalculated for each of those months instead of being estimated with a single formula — that's how the projection can show you the month Social Security starts, when Medicare kicks in, or when your portfolio might run dry.

How it works

• Four buckets, one timeline. Your retirement savings — your "nest egg" — is split into four account types: Traditional (401(k)/IRA, taxed when you take money out), Roth (already taxed, grows tax-free), Taxable (brokerage and savings), and HSA (health savings). Each bucket grows on its own every month at the rate you set under How much your investments grow each year, tracked separately from today through age 95.

• Building up, before retirement. Until you retire, the projection adds your paycheck contributions — 401(k)/403(b)/457/TSP, IRA, Roth, HSA, and any employer match — every month, capped at the current IRS contribution limits for your age (including the extra "catch-up" amount allowed once you turn 50).

• Drawing down, after retirement. Once you retire, the projection covers your monthly spending in this order: your remaining active income, then Social Security, then pensions (adjusted yearly for cost of living), then annuities, then your HSA (for medical costs), then real-estate sale proceeds if you've downsized, and finally your investment accounts — taxable first, then Traditional, then Roth last. Taking money out of an account like this is called a withdrawal. This order is designed to leave your tax-free Roth money growing as long as possible.

• Required Minimum Distributions (RMDs). The IRS requires you to start withdrawing from Traditional accounts at a set age — 73 if you were born 1951–1959, or 75 if you were born in 1960 or later. The projection applies this automatically, using the IRS's official withdrawal-percentage table for your age. If an RMD is bigger than what you need that month, the extra is reinvested into your taxable account instead of sitting idle.

• Taxes. Each account type is taxed the way the IRS taxes it:

  • Traditional withdrawals (and RMDs) count as ordinary income and are taxed at your Share of retirement income paid in taxes (which you set yourself; 20% until you change it). Salary, pensions, annuities and business income use the same rate.
  • Roth withdrawals are tax-free.
  • Taxable (brokerage) withdrawals are taxed only on the gain, at a 15% long-term capital-gains rate. The part that's your original money comes back tax-free. Beyond Payday tracks the money you add during the projection as your cost basis; your starting balance is treated as all gain, since it doesn't know what you paid, so the estimate errs on the high side. A taxable gain on a home sale also uses the 15% rate.

  That rate is one flat rate instead of every IRS bracket — see Assumptions and limits below for what that means. Social Security itself is only partly taxable: the projection uses the IRS's formula, based on your "provisional income" (your other income plus half your Social Security benefit), to work out whether 0%, up to 50%, or up to 85% of your benefit is taxed.

• Pension lump sums (DROP). If a pension includes a one-time payout — like a DROP (Deferred Retirement Option Program) check — you can enter the payout amount and the age you take it in that pension's Advanced Options. The projection adds it once, at that age: rolled into a tax-deferred account (taxed later as you withdraw it) or taken as cash (taxed as ordinary income in the payout year), whichever you choose.

• Life expectancy and survivor benefits. Each person has a Plan until age in the Retirement Age settings (default 95, the end of the projection). If you set it lower, that person's pension stops at that age and the pension's survivor-benefit percentage (in its Advanced Options) keeps paying your spouse, with any cost-of-living raises carried over. Their Social Security stops too, and the surviving spouse keeps whichever benefit is higher — their own or the one that stopped. As at SSA, a survivor benefit started before the survivor's full retirement age (67) is reduced, down to 71.5% at 60, and if the person who died had claimed early it's limited to the larger of what they were collecting or 82.5% of their full benefit. If you have no spouse, the projection ends at your life expectancy instead of 95. Annuities work the same way with their own survivor-benefit percentage: 0% (the default) means payments stop, like a single-life annuity, and a fixed-term annuity only pays the survivor for whatever is left of its term.

• Spending after a death. Once one spouse reaches the age you planned until, everyday spending — your bills and extra spending money — drops to the Spending if one of you passes away under Retirement Age (75% by default). Loan and debt payments, your mortgage, and property tax stay the same, since the survivor still owes them in full. Healthcare isn't scaled by the %: the late spouse's health insurance, Medicare, and long-term care costs simply stop.

• Default rates. If you haven't changed them, the projection uses a 4% growth rate and 3.5% general inflation. The 4% withdrawal rate has no setting on the Retirement page.

• Milestones. As the simulation runs, it logs the big moments in order — retirement, Social Security start, pension and annuity payments starting, a pension lump-sum payout, a life expectancy you've set, the Medicare transition at 65, age 59½ (penalty-free withdrawals), RMDs starting, loans paid off, long-term care starting, a home sale — so you can see exactly when each one lands on the chart.

• Your plan's health. After running the full timeline, Beyond Payday tells you in plain language whether your plan is on track. On Track means your savings are projected to last through age 95. At Risk means they're projected to run out between 90 and 94. Behind means between 80 and 89. Critical means before 80. The Plan summary appears before the income comparison table and includes an estimate qualifier: results are based on your plan settings and are not guaranteed. On a phone, that table shows one milestone at a time — choose it from the Milestone dropdown or step with the arrows to read each figure in full.

An example with real numbers

Say you're 60 with $500,000 in a Traditional 401(k), planning to retire at 65 with a $2,500/month Social Security benefit starting at 67. Between 60 and 65, the projection keeps adding your contributions and growing your balance at the rate you set. At 65, it stops counting your paycheck and starts covering your bills from your accounts instead. From 65 to 67 — before Social Security starts — it draws from your Taxable account, then your Traditional account, to cover the gap. Once Social Security begins at 67, it covers part of your spending, so less comes out of your portfolio each month. At 73, Required Minimum Distributions kick in automatically, whether or not you need the money that month. The chart shows this whole story as one continuous line from today through age 95.

Assumptions and limits

• Taxes are a flat rate, not brackets. The Share of retirement income paid in taxes setting is one blended percentage, not a simulation of actual federal and state tax brackets. Investment gains always use 15%, though the real rate can be 0% at low incomes or 20% at very high ones, plus state tax. It's a reasonable approximation for long-range projections, but your real tax bill in any given year could be higher or lower.
• The Dashboard and Beth use simplified math. The Retirement page runs the full month-by-month simulation described above. The Dashboard summary and Beth's answers use faster, simplified formulas to estimate the same numbers, so they can differ slightly from what the Retirement page shows. If you notice a gap, treat the Retirement page as the more accurate source.
• One home sale. The projection models selling or downsizing your primary home once — it doesn't model buying and selling multiple properties.
• One steady growth rate per account, not year-to-year market swings — unless you turn on Monte Carlo simulation mode, which models thousands of randomized market paths instead. See Run a Monte Carlo simulation.
• US federal rules only. State-specific tax quirks aren't modeled individually — they're folded into your single Share of retirement income paid in taxes.

Guided setup asks about most of these settings in plain language, one step at a time — see Set up your retirement plan with guided setup.