Planning for Retirement with Buckets

How the Projection Works

Buckets grows each retirement account forward using compound interest:

Then it estimates how much annual income that portfolio can safely produce using your draw rate, adjusts for taxes, and adds Social Security to get a total retirement income figure.

Finally, it converts that future income back to today's dollars using your inflation assumption, so you can compare it directly to your current income.

The Draw Rate (Safe Withdrawal Rate)

The draw rate is the percentage of your portfolio you withdraw each year in retirement. The classic 4% rule — from the Trinity Study — suggests that a 4% withdrawal rate gives a portfolio a high probability of lasting 30+ years, assuming a diversified portfolio.

• 3%: Very conservative — high confidence across 40+ year retirements
• 4%: The traditional rule — well-studied for 30-year retirements
• 5%+: More aggressive — works in strong markets but carries more depletion risk

At 4%, a $1,000,000 portfolio produces $40,000/year in gross withdrawals before taxes.

Tax Rate at Retirement

Most retirees are in a lower tax bracket than during their working years because they're drawing less total income. Your tax rate in retirement depends on:

• Which accounts you draw from (Traditional 401(k)/IRA: taxed as income; Roth: tax-free)
• Your total annual withdrawals
• Social Security income (up to 85% can be taxable)
• Other income sources (rental, part-time work)

Buckets applies a blended tax rate to your draw income. The default is 40% — a conservative assumption. Adjust this down if you expect a mix of Roth withdrawals or have a simple income picture.

Capital Gains Tax

Withdrawals from taxable brokerage accounts are often taxed as long-term capital gains rather than ordinary income — which typically means a lower rate (0%, 15%, or 20% depending on your income).

Buckets applies the capital gains rate to brokerage account withdrawals and the income tax rate to Traditional 401(k)/IRA withdrawals. Roth accounts are withdrawn tax-free.

The Lifestyle Multiplier

The Lifestyle Multiplier compares your projected retirement income (in today's dollars) to your current net income:

• 1.0×: You'll have the same spending power in retirement as today
• 0.8×: You'll need to reduce spending by about 20%
• 1.2×: You'll actually have more spending power than today

Many planners target 0.7–0.8× because retirees typically spend less (no commuting, no savings contributions, often lower housing costs).

Social Security

Social Security provides a monthly government benefit based on your lifetime earnings history. You can claim as early as 62 (reduced benefit) or as late as 70 (maximum benefit). The "full retirement age" is 66–67 depending on birth year.

Enter your estimated annual Social Security benefit in Retirement Settings. You can find your estimate at ssa.gov/myaccount. Buckets inflates this amount to your retirement date using your inflation assumption, then applies your income tax rate.

Account Types: 401(k), IRA, Roth

Roth accounts are particularly powerful for retirement because all growth and withdrawals are completely tax-free. They also have no required minimum distributions (RMDs), giving you more flexibility.

Adjusting Your Assumptions

The Growth Assumptions card lets you customize three key rates:

• Investment Growth: The U.S. stock market has averaged ~10% annually over long periods. After inflation (~3.5%), that's roughly 6–7% real return. We suggest 7–10% depending on your risk tolerance and asset mix.
• Inflation: The Federal Reserve targets ~2%. Recent periods have run 3–4%. Use 3–3.5% for long-horizon projections.
• Salary Increase: How fast your income grows before retirement — affects how Buckets models your future contribution capacity.