Retirement Planning: FIRE, RMDs, Roth vs Traditional, Social Security, and Annuities

Retirement planning is fundamentally about accumulating enough capital so that investment returns and withdrawals can replace your earned income indefinitely — or at least long enough. This guide walks through the key concepts, formulas, and decision frameworks you need to build and manage a retirement strategy, from early accumulation through the distribution phase.

How Much Do You Need? The Safe Withdrawal Rate

The most widely cited retirement rule of thumb is the 4 % rule, derived from the Trinity Study: a portfolio invested roughly 60/40 in stocks and bonds has historically sustained a 4 % annual withdrawal rate (adjusted for inflation) for at least 30 years in almost all historical market conditions.

Nest egg needed = annual spending / safe withdrawal rate

If you plan to spend $60,000 per year: $60,000 / 0.04 = $1,500,000. The Retirement Withdrawal Calculator models how long a given portfolio will last under different withdrawal rates and return assumptions, including sequence-of-returns risk.

Coast FIRE

Coast FIRE is the amount of money you need invested today so that compound growth alone — with no further contributions — will reach your retirement target by your planned retirement age. The formula is:

Coast FIRE number = FI target / (1 + r)ⁿ

where r is your expected real (inflation-adjusted) annual return and n is years until retirement. Once you hit your Coast FIRE number, you only need to earn enough to cover current expenses — you can stop saving entirely. The Coast FIRE Calculator computes this for any combination of target, return assumption, and time horizon.

Roth vs Traditional: Which Is Better?

The core trade-off is when you pay tax:

Traditional: Contributions may be tax-deductible now; withdrawals in retirement are taxed as ordinary income.
Roth: Contributions are made with after-tax dollars; qualified withdrawals in retirement are tax-free.

If your tax rate will be higher in retirement than it is now, Roth wins. If your tax rate will be lower in retirement, Traditional wins. In practice, most people benefit from holding some of each type for tax diversification. The Roth vs Traditional Calculator models after-tax outcomes under different rate assumptions across your entire investment horizon.

Required Minimum Distributions (RMDs)

The IRS requires you to begin withdrawing from pre-tax retirement accounts (Traditional IRAs, 401(k)s, 403(b)s, SEP-IRAs) starting at age 73 (as of 2023 SECURE 2.0 rules). The annual RMD is:

RMD = account balance as of December 31 of prior year / IRS life-expectancy factor

Factors come from IRS Publication 590-B Uniform Lifetime Table. Failing to take the full RMD triggers a penalty of 25 % of the shortfall (reduced to 10 % if corrected promptly). The Required Minimum Distribution (RMD) Calculator looks up the correct factor and computes your RMD for any account balance and age. Owners of 403(b) accounts can also explore dedicated rules via the 403(b) Calculator, and self-employed individuals should review limits with the SEP-IRA Calculator.

Social Security Benefit Estimates

Social Security benefits are based on your 35 highest-earning years, indexed for wage growth. The formula applies progressively lower multipliers (bend points) to your Average Indexed Monthly Earnings (AIME) to produce your Primary Insurance Amount (PIA). You can claim as early as age 62 (with a permanent reduction of up to 30 %) or delay until 70 (with an increase of 8 % per year beyond full retirement age). The Social Security Benefit Estimate Calculator approximates your PIA and shows the long-term breakeven between claiming early versus late.

Pension Lump Sum vs Annuity

If your employer offers a defined-benefit pension, you may face a choice between a monthly annuity for life or a one-time lump sum. The key question is whether the present value of the annuity stream exceeds the lump sum at your discount rate. The Pension Lump Sum vs Annuity Calculator computes the internal rate of return on the annuity — essentially, the yield you would need from investing the lump sum to match the pension income.

For those purchasing income annuities on the open market, the Annuity Payout Calculator estimates monthly income based on premium, annuity type, and age.

Diagnosing a Retirement Shortfall

Many savers discover mid-career that their projected nest egg falls short of their target. The Retirement Shortfall Calculator quantifies the gap and shows what additional savings rate or return would close it. Two targeted tools help close the gap:

The Catch-Up Contribution Calculator shows the value of the extra $7,500 annual contribution allowed for those 50+ in 401(k) plans and $1,000 extra in IRAs.
The Savings Rate to Retire Calculator answers the question: at your current income and spending, what percentage of income do you need to save to retire by a target age?

Common Mistakes

Treating the 4 % rule as a guarantee. It is a historical estimate, not a promise. Extended low-return environments or early retirement horizons beyond 30 years call for more conservative withdrawal rates (3–3.5 %).
Forgetting that RMDs are taxable income. Large RMDs can push you into a higher bracket, trigger Medicare IRMAA surcharges, and make more Social Security taxable. Plan ahead with Roth conversions in lower-income years.
Claiming Social Security too early without running the breakeven. Waiting from 62 to 70 can increase your monthly benefit by more than 75 %, and the breakeven age for the cumulative total is typically in the early-to-mid 80s.
Ignoring sequence-of-returns risk. A market crash in the first five years of retirement is far more damaging than one later, because early withdrawals deplete principal that can never recover. A cash or bond buffer can mitigate this.

What is the difference between Coast FIRE and traditional FIRE?

Traditional FIRE (Financial Independence, Retire Early) means you have accumulated your full retirement target and can stop working immediately. Coast FIRE means you have saved enough that compound growth will reach your target by retirement age without further contributions — so you can stop contributing but still need to cover living expenses from earned income until then.

At what age should I start taking Social Security?

It depends on your health, other income sources, and whether you are married. In good health with no immediate cash need, delaying to 70 maximises lifetime benefits if you live past approximately age 82. Married couples should strategise jointly because the higher earner's benefit becomes the survivor benefit.

How are RMDs calculated?

Divide your December 31 account balance by the IRS life-expectancy factor for your age. For a 75-year-old with $500,000, the factor is 24.6, giving an RMD of $500,000 / 24.6 = $20,325 for the year.