Tax-Aware Retirement Calculator

Growth Calculation

Each year, your account balances grow according to the selected return model:

• Fixed Return: All accounts grow by a constant rate (e.g., 9.8%) each year: Balance_year+1 = Balance_year × (1 + r)
• Random Walk: Returns are randomly sampled from historical S&P 500 data (1975-2024), using a seeded pseudo-random number generator for reproducibility. Each year gets a different historical return, bootstrapped with replacement.

Mid-Year Contributions

Annual contributions are assumed to occur mid-year on average. To account for partial-year growth, contributions are multiplied by (1 + (g - 1) × 0.5), where g is the year's growth factor. This gives contributions roughly half a year of growth, which is more realistic than assuming all contributions happen at year-end or year-start.

Contribution Increases

If enabled, annual contributions increase by the specified percentage each year to model salary growth and increasing savings capacity: Contribution_year+1 = Contribution_year × (1 + increase_rate).

Account Types

The calculator tracks three separate account types:

• Taxable (Brokerage): Subject to long-term capital gains tax on withdrawals. We track your cost basis (total contributions) and only the gains are taxed.
• Pre-Tax (401k/Traditional IRA): Contributions grow tax-deferred. All withdrawals are taxed as ordinary income. Subject to Required Minimum Distributions (RMDs) starting at age 73.
• Post-Tax (Roth): Contributions grow tax-free. Qualified withdrawals in retirement are completely tax-free (no taxes, no RMDs).

Withdrawal Strategy

The first year's withdrawal is calculated as a percentage of your total retirement balance (e.g., 3.5% for a conservative approach, 4% for the classic "4% rule"). In subsequent years, the withdrawal amount increases with inflation to maintain constant purchasing power:

Withdrawal_year+1 = Withdrawal_year × (1 + inflation_rate)

Proportional Withdrawal

Withdrawals are taken proportionally from all three account types based on their current balances. If one account runs out, the shortfall is automatically drawn from the remaining accounts. This creates a natural tax diversification strategy.

Tax Calculation

Each year's withdrawal is subject to multiple layers of taxation:

• Ordinary Income Tax: Pre-tax withdrawals are taxed using the federal progressive tax brackets (single filing status) after applying the standard deduction. Brackets range from 10% to 37%.
• Long-Term Capital Gains Tax: Gains from taxable account withdrawals are taxed at preferential LTCG rates (0%, 15%, or 20%) based on your total income. Only the gains portion is taxed—your original contributions (basis) come out tax-free.
• Net Investment Income Tax (NIIT): An additional 3.8% tax on investment income (capital gains) if your modified AGI exceeds $200K.
• State Income Tax: A flat percentage applied to all taxable income if you specify a state tax rate (varies by state, 0% to ~13%).
• Roth Withdrawals: Completely tax-free! This is the "tax-free income" advantage of Roth accounts.

Required Minimum Distributions (RMDs)

Starting at age 73, the IRS requires you to withdraw a minimum amount from pre-tax accounts each year. The RMD is calculated as:

RMD = Pre-Tax Balance / Divisor

The divisor comes from the IRS Uniform Lifetime Table (e.g., 26.5 at age 73, decreasing each year). If your RMD exceeds your spending needs, the excess is withdrawn, taxed, and reinvested in your taxable account (with the after-tax amount becoming new basis).

Social Security Benefits

If enabled, Social Security benefits are calculated using the 2025 bend point formula:

• 90% of Average Indexed Monthly Earnings (AIME) up to $1,226/month
• 32% of AIME between $1,226 and $7,391/month
• 15% of AIME above $7,391/month

This gives your Primary Insurance Amount (PIA). If you claim before Full Retirement Age (FRA), benefits are reduced by 5/9 of 1% per month for the first 36 months, then 5/12 of 1% for each additional month. If you delay past FRA, benefits increase by 2/3 of 1% per month (8% per year). SS benefits reduce the amount you need to withdraw from your portfolio.

Continuous Growth

Your remaining account balances continue to grow each year according to the same return model used in the accumulation phase. Growth is applied before withdrawals each year, so your money keeps working for you throughout retirement.

End-of-Life Wealth

If your accounts last until age 95, any remaining balance is your end-of-life (EOL) wealth, which becomes your estate. This represents money you can pass to heirs or charity.

Estate Tax

Under current law (2025), estates exceeding $NaNmillion are subject to a 40% federal estate tax on the amount above the exemption. Your heirs receive the net estate after this tax. Note: Estate tax laws may change, and this is a simplified calculation that doesn't account for spousal transfers, trusts, or state estate taxes.

Generational Wealth Model

If enabled, the generational model simulates how long your estate could support future beneficiaries (children, grandchildren, etc.) with annual payouts in today's dollars:

• The net estate (after estate tax) is deflated to 2025 purchasing power
• Each year, the fund grows at a real rate (nominal return minus inflation)
• Only beneficiaries at or above the minimum distribution age receive payouts in constant 2025 dollars
• Beneficiaries age each year; those reaching max lifespan exit the model
• Every N years (birth interval), fertile beneficiaries (ages 20-40) produce offspring
• Simulation continues until funds are exhausted or 10,000 years (effectively perpetual)

This models a "perpetual trust" scenario and helps you understand whether your legacy could support multiple generations indefinitely or for how many years it would last under various payout scenarios.