Income replacement ratio: Comparing Retirement Income with Earlier Earnings
An income replacement ratio relates retirement income to pre-retirement income. It provides a comparison rather than a universal target.
Use the Income replacement ratio Calculator to enter your own figures and compare the result with the worked example below.
Income replacement ratio formula
Replacement ratio = Retirement income ÷ Pre-retirement income × 100
Worked example
| Item | Example value |
|---|---|
| Retirement income | 40000 USD |
| Pre-retirement income | 60000 USD |
| Income replacement ratio | 66.666667% |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Match gross with gross or net with net. Spending needs can change in retirement, so the ratio alone does not measure adequacy.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Introduction to investing. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
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