How to calculate your retirement income

6 October 2026 · Calcosmo editorial team

Your retirement income is the sum of three sources: your state pension, any workplace pension, and what your own savings can safely pay out each year. A common rule of thumb for savings is the 4% rule: withdraw 4% of your pot in the first year, then adjust for inflation. Retiring in the Netherlands? Find out when your state pension starts with the Dutch state pension age calculator.

Step 1: how much will you need?

A frequently used starting point is 70 to 80% of your pre-retirement income. Commuting costs and pension contributions stop, and many retirees have paid off their mortgage. On the other hand, healthcare and travel can cost more. The best estimate starts from your own budget: list your expected monthly costs and multiply by 12.

Step 2: add up your guaranteed income

• State pension. In the UK, the full new State Pension depends on 35 qualifying years of National Insurance; your forecast is on gov.uk. In the US, your Social Security statement shows estimates at different claiming ages. In the Netherlands, the AOW depends on how many of the 50 years before the pension age you lived or worked in the country.
• Workplace pension. A defined benefit plan states an annual amount; a defined contribution plan (such as a 401(k) or most UK workplace pensions) gives you a pot, which you treat like savings.
• Annuities you have bought or plan to buy.

Step 3: what your savings can pay

The 4% rule comes from US research in the 1990s, which looked at historical returns of a mix of stocks and bonds. Withdrawing 4% of the starting balance in year one, and then the same amount adjusted for inflation each year, would have lasted at least 30 years in every historical period studied.

annual income from savings ≈ pot × 4%

A pot of $500,000 gives about $20,000 a year. Turned around: the pot you need is the annual shortfall × 25.

The rule is a guideline, not a guarantee. It assumes a 30-year retirement and a balanced portfolio. Retiring early, holding only cash, or high fees all argue for a lower rate, such as 3 to 3.5%.

Worked example: retiring in the Netherlands

A single person wants €36,000 a year before tax in retirement.

The AOW starts at 67 in 2026 and 2027, and at 67 and 3 months from 2028. People who lived abroad build up 2% less AOW for each year they were not insured, so check your own build-up.

Step 4: account for tax and inflation

Pensions and withdrawals from tax-deferred accounts are usually taxed as income. Many countries tax retirees at lower rates; in the Netherlands, people above AOW age no longer pay the AOW contribution, so the first-bracket rate is much lower. Plan in today's money and assume your costs rise with inflation.

Step 5: fill the gap

If there is a shortfall, the levers are the same everywhere: save more, work a little longer, retire with lower costs, or accept a higher (riskier) withdrawal rate. Every extra year of work both adds savings and shortens the period the money must last.