Income Replacement Ratio
Calculator
Results
- Income replacement ratio (%)
- 64.285714
- Annual income drop
- 25,000
- Monthly income drop
- 2,083.333333
Retirement planning results
| Income replacement ratio (%) | 64.285714 |
| Annual income drop | 25,000 |
| Monthly income drop | 2,083.333333 |
formula-map diagram
- Income replacement ratio (%)
- 64.285714
- Annual income drop
- 25,000
- Monthly income drop
- 2,083.333333
Retirement planning relationship
Formula
Ratio = retirement income ÷ pre-retirement income= 64.285714285714
Note
This is not financial advice. It is a simplified model: it applies the displayed standard formula to the figures you entered, assumes a single constant rate for every year, and ignores taxes, fees, sequence-of-returns risk, health costs, longevity risk and any country's specific pension, benefit or minimum-distribution rules. Real returns can be negative and real retirements rarely follow a smooth curve. Check the assumptions and consult a licensed adviser before acting on any figure.
More in Retirement planning
See all →Frequently asked questions
What does the income replacement ratio measure?+
It's the reverse of a benefit calculation: given your expected retirement income (from pension, savings withdrawals, government benefits) and your pre-retirement salary, it computes what percentage of your former income that retirement income actually represents. It tells you where you stand relative to common targets like 70-80%.
Is a ratio below 70% automatically a problem?+
Not necessarily — some retirees comfortably live on less if they've paid off debt, downsized, or have modest planned spending, while others need more than 80% if they plan to travel extensively or have ongoing high healthcare costs. The ratio is a useful benchmark, not a strict pass/fail test.
Should Social Security or public pension income be included in the numerator?+
Yes — the ratio is meant to reflect your total retirement income from all sources (employer pension, government benefits, personal withdrawals), not just one component, so leaving out a major income source will understate your true replacement ratio.
Why does the calculation use pre-retirement income as the denominator instead of retirement expenses?+
Because the replacement ratio concept is specifically about comparing retirement income to your prior earning level, which is a common industry shorthand for lifestyle continuity; it's a different (though related) question from directly comparing income to your actual projected retirement expenses, which some prefer as a more precise measure.
Can this ratio change significantly from year to year in retirement?+
Yes, especially if part of your income comes from investment withdrawals that fluctuate with market performance or from a variable annuity payout, or if inflation adjustments to pensions and benefits differ from year to year — recalculating periodically gives a more current picture than a single point-in-time estimate.