How to Calculate Payments for Retirement

You spend your entire working life saving up money for retirement, but saving and investing that money is only half of the equation. The other half is planning for how to make that money last. That means creating a comprehensive retirement budget that accurately reflects all of your expenses and assessing how each part of your retirement portfolio, from pensions and Social Security to 401(k)s and IRAs, can provide you with the income you need for a comfortable and worry-free retirement.

• 1

  Make a list of all guaranteed sources of income you will have in retirement. These include pensions, annuities and Social Security payments. You should receive a form from the Social Security Administration each year detailing how much you will receive in early benefits and at your full retirement age. Your employer should be able to provide you with your monthly pension benefit.

• 2

  Create a retirement budget if you have not already done so. You can base your retirement budget on your existing personal budget, but keep in mind that some expenses might go down in retirement, while others will likely go up. If your home will be paid off before you retire, you can eliminate that monthly expense, but your expenses for travel and leisure activities are likely to go up.

• 3

  Compare your total monthly expenses as shown on the retirement budget to your total monthly guaranteed income as calculated in step 1. Any shortfall will have to be made up by tapping the funds in your 401(k), IRA and other retirement accounts.

• 4

  Add up the balances in your 401(k) plan, IRA and other accounts earmarked for retirement. Multiply that amount by 4 percent to get the maximum amount you should withdraw in the first year of retirement. Withdrawing more than 4 percent from your retirement funds increases the likelihood that you will run out of money down the line.

• 5

  Divide the annual figure from step 4 by 12 to get the total monthly withdrawal amount. If the amount you can withdraw safety from your retirement plans does not meet your spending needs, you might need to work a few years longer or take on a part-time job in retirement.