How to Calculate Retirement Distributions

When you save money for retirement, you have many options. 401k plans and IRAs allow you to defer income tax on your investments, but the choice of investments is often limited to whatever your employer plan or brokerage allows. When you retire, you may keep your employer plan or roll your retirement savings into a new account. If you decide to do the latter, you should understand how to calculate your retirement distributions.

Have an insurance company do the distributions on your behalf. This is the easiest method of calculating your retirement distributions. An insurance company can apportion your retirement savings according to a set formula that will prevent you from running out of money before your death. The insurer uses an annuity contract to accomplish this.

Calculate the total account balance for all of your personal retirement savings. This includes all 401k account balances, IRAs and any other savings you will use for retirement.

Divide the total retirement account balance by the divisor in the tables in Appendix C of the Internal Revenue Service's Publication 590 (see Resource). These life expectancy tables estimate average life expectancies. Your age is associated with a life expectancy (in years). The life expectancy number is what you will divide your retirement savings by. The resulting number is how much you should withdraw every year.

Withdraw just the interest from your retirement savings. If you are worried that you may outlive your average life expectancy as listed in the IRS mortality tables, you may simply withdraw the interest generated by your retirement savings. This will preserve the principal amount while giving you a sustainable retirement income.


  • "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A. Crane; 2007
  • "The Calculus of Retirement Income"; Moshe A. Milevsky; Cambridge University Press; 2006

About the Author

I am a Registered Financial Consultant with 6 years experience in the financial services industry. I am trained in the financial planning process, with an emphasis in life insurance and annuity contracts. I have written for Demand Studios since 2009.