What the number is
Your Confidence Spend is the most you can spend on living expenses every year, in today's dollars, and still have your money last to your target age (default: 90), assuming markets do as badly as they have ever done over a working lifetime.
It is a floor, not a forecast. It is not what we expect will happen. It is what still works if the next thirty years are the worst thirty years the US stock market has produced since record-keeping began in 1871.
Two things are held separately and are not part of the number:
- Healthcare is funded on top of Confidence Spend and priced by year, because it moves on its own schedule (an ACA premium before 65, Medicare and Medigap after) and it interacts with taxes in ways ordinary spending does not.
- Major one-time expenses (a roof, a wedding, a car) are held fixed and shown separately, so one large year does not silently depress the every-year number.
So Confidence Spend answers a specific question: after taxes and healthcare and the big one-offs are paid for, what is left to live on, every year, safely?
The conservative basis
Confidence Spend is solved against a deliberately harsh return assumption we call the conservative floor. It has exactly two parts.
| Component | Assumption | Why |
|---|---|---|
| Stocks | 3% real (after inflation) |
The worst 30-year rolling real total return US stocks have delivered since 1871 (Shiller data). The long-run median is closer to 6.5%. |
| Cash buffer | 8 years of spending at 0% real | Historically most US stock drawdowns have recovered inside 8 years. Holding 8 years of spending outside stocks keeps the stress test from assuming you sell at the bottom. |
Both figures are fixed constants in the engine. Neither is user-adjustable, and neither is a recommendation. The 8-year cash bucket is an accounting assumption inside the math, not advice to hold 8 years of cash in your own accounts.
Every other input is your own: your spending, your Social Security and claiming age, your accounts, your withdrawal order, your state, your filing status.
How the number is actually solved
There is no closed-form formula. Confidence Spend is found by binary search over a full year-by-year simulation:
- Guess an annual spending amount.
- Run the whole plan forward, year by year, to your target age: withdraw spending plus healthcare, gross the withdrawal up for the tax it triggers, add Social Security once you claim it, apply the conservative floor return, and carry the balance into the next year.
- If the money lasts to the target age, the guess was too low. If it runs out early, the guess was too high.
- Narrow the range and repeat until the answer settles to the dollar.
The answer is the largest spending amount that survives the simulation. Earlier versions of this page presented a closed-form annuity formula as the model. That formula is a reasonable mental picture of the mechanics, but it is not what runs, and it cannot reproduce the numbers below: it has no way to represent taxes that change with income, a return rate that changes with the year, or healthcare that steps down at 65. We removed it rather than leave it to mislead.
A worked example you can check yourself
These inputs are reproducible on the free Confidence Spend calculator. Type them in and you should get the same number.
| Input | Value |
|---|---|
| Age | 62 |
| Investable portfolio | $1,500,000 |
| Tax rate | 12% ("Medium: mixed accounts") |
| Social Security | $30,000/yr from age 67 |
| Healthcare before 65 | $17,230/yr |
| Healthcare from 65 | $8,645/yr |
| Plan to age | 90 |
per year, in today's dollars, for life
Here is the arithmetic, so you can follow it row by row. Net need is Confidence Spend plus healthcare minus Social Security. Gross withdrawal is net need divided by (1 − 0.12), because the withdrawal has to cover its own tax.
| Age | Start balance | Social Security | Healthcare | Net need | Gross withdrawal | Real return | End balance |
|---|---|---|---|---|---|---|---|
| 62 | $1,500,000 | $0 | $17,230 | $87,644 | $99,596 | 0% | $1,400,404 |
| 63 | $1,400,404 | $0 | $17,230 | $87,644 | $99,596 | 0% | $1,300,809 |
| 64 | $1,300,809 | $0 | $17,230 | $87,644 | $99,596 | 0% | $1,201,213 |
| 65 | $1,201,213 | $0 | $8,645 | $79,059 | $89,840 | 0% | $1,111,373 |
| 66 | $1,111,373 | $0 | $8,645 | $79,059 | $89,840 | 0% | $1,021,533 |
| 67 | $1,021,533 | $30,000 | $8,645 | $49,059 | $55,749 | 0% | $965,784 |
| 68 | $965,784 | $30,000 | $8,645 | $49,059 | $55,749 | 0% | $910,035 |
| 69 | $910,035 | $30,000 | $8,645 | $49,059 | $55,749 | 0% | $854,286 |
| 70 | $854,286 | $30,000 | $8,645 | $49,059 | $55,749 | 3% | $822,494 |
| 75 | $685,494 | $30,000 | $8,645 | $49,059 | $55,749 | 3% | $648,637 |
| 80 | $489,817 | $30,000 | $8,645 | $49,059 | $55,749 | 3% | $447,090 |
| 85 | $262,974 | $30,000 | $8,645 | $49,059 | $55,749 | 3% | $213,441 |
| 89 | $55,749 | $30,000 | $8,645 | $49,059 | $55,749 | 3% | $0 |
Three things worth noticing:
- Healthcare falls at 65 when Medicare starts, and the spending number does not move. Confidence Spend is constant by design; healthcare is what changes.
- Social Security arriving at 67 cuts the portfolio draw by more than a third, from $89,840 to $55,749. This is why a calculator that ignores Social Security gets the answer badly wrong.
- The return is 0% for the first eight years (ages 62 through 69) and 3% real from age 70. That is the cash buffer, and it is the single biggest reason this number is lower than the one a generic calculator hands you.
The balance reaches exactly zero as age 90 begins, which is what "solved to the dollar" means. Spend a dollar a year more and the plan fails before 90.
The same case under looser assumptions
The floor is doing real work. Same inputs, only the return assumption changed:
| Return assumption | Confidence Spend | Versus the floor |
|---|---|---|
| The floor (8 years at 0% real, then 3% real) | $70,414 | baseline |
| Flat 3% real every year, no cash buffer | $81,037 | +15% |
| Flat 6.5% real (the long-run US median) | $107,028 | +52% |
A calculator quoting $107,028 is not lying to you. It is answering a different question: what works if the future is average. Confidence Spend answers what works if it is not.
For reference, the 4% rule on this portfolio gives $60,000, but it ignores Social Security entirely and makes no allowance for healthcare. It is not more or less conservative in a way you can rely on; it is answering a much narrower question.
The refinement in the paid app: a real cash bucket
The free calculator applies 0% real to the whole portfolio for the first eight years. That is simple to follow, easy to check by hand, and deliberately on the harsh side.
The app does something closer to what a careful retiree actually does. Each year it earmarks enough cash to cover the next eight years of expected portfolio draws, and leaves the rest invested in stocks at 3% real. The earmark is refilled every year rather than drained once at the start:
cashNeeded(y) = sum of expected net draws over years y .. y+7
stockFraction(y) = (portfolio(y) - cashNeeded(y)) / portfolio(y)
blendedReal(y) = stockFraction(y) x 3%So the portfolio is never entirely in cash. In the worked example above, the blend looks like this:
| Age | Portfolio | Cash earmarked | In stocks | Blended real return |
|---|---|---|---|---|
| 62 | $1,500,000 | $649,010 | 56.7% | 1.70% |
| 67 | $1,128,728 | $449,288 | 60.2% | 1.81% |
| 72 | $933,652 | $449,288 | 51.9% | 1.56% |
| 77 | $708,448 | $449,288 | 36.6% | 1.10% |
| 82 | $449,291 | $449,288 | 0% | 0.00% |
Late in the plan the whole remaining portfolio sits inside the eight-year window, so the blend correctly falls to zero: there is nothing left that can safely be exposed to stocks.
The two rules land in almost the same place. Holding everything else in the example fixed and swapping only the return rule, the blended bucket gives $70,777 against the free calculator's $70,414, a difference of about 0.5%. That is the intended relationship: the free tool is never rosier than the product on the return assumption.
Because the app sizes the cash bucket against the Confidence Spend itself rather than against whatever you happen to spend today, the number stays a property of your portfolio, not of your current budget. Raising your grocery bill does not lower your Confidence Spend.
Where the free calculator and the app genuinely differ
The free calculator has a handful of inputs. The app has your whole plan. The return assumption is the same; almost everything else is a simplification. Being specific about it:
| Free calculator | Lumifin app | |
|---|---|---|
| Conservative floor | Yes: 8 years at 0% real, then 3% real | Yes, with the annually refilled bucket above |
| Taxes | One flat rate you pick (5%, 12% or 20%) | Federal progressive brackets, capital gains and qualified dividend rates, the standard deduction, Social Security taxation, your state |
| Accounts | One pooled portfolio | Traditional, Roth and taxable tracked separately, with your withdrawal order |
| Healthcare | A flat annual figure at full unsubsidized price, stepping down at 65 | ACA premiums priced against your actual modeled income and the subsidy cliff, plus IRMAA surcharges after 65, year by year |
| RMDs | Not modeled | Modeled |
| Roth conversions | Not modeled | Modeled |
Two of those cut in opposite directions, which is worth saying plainly:
- The flat tax rate is a simplification, not a safety margin. If your real effective rate is higher than the rate you picked, the free number is too high.
- The full-price healthcare figure is conservative: it assumes you get no help with premiums before 65. If you qualify for an ACA subsidy, your real cost is lower and your real Confidence Spend is higher. The ACA subsidy calculator will estimate yours.
The free calculator cannot resolve either one, because the subsidy depends on your withdrawal plan and the withdrawal plan is exactly what a five-input tool cannot see. That is its honest limit, and it is why the app exists.
What it assumes, and what could still go wrong
What Confidence Spend assumes
- Returns follow the conservative floor above: 3% real on stocks, 8 years of spending outside stocks at 0% real. Not an average, not a projection.
- Spending is constant in real terms, adjusted for inflation each year.
- Your income sources arrive as planned.
- You live to your target age (default 90; you can raise it).
- No major unexpected expenses beyond the ones you have modeled.
What could still go wrong
- The future is worse than the worst 30 years on record. The floor is the worst outcome in the historical sample, not a guarantee about outcomes outside it.
- Returns stay poor for longer than any US window, as in Japan after 1990.
- Income does not materialize: job loss, disability, a benefit cut.
- Healthcare costs rise faster than modeled, or you need long-term care.
- You live past your target age.
Ways to build in more margin: raise your target age, set a target ending balance above zero, re-run as circumstances change, and model the risks that actually worry you as scenarios.
What this is, and what it is not
Lumifin is a modeling tool. It shows you the numbers and the gap between choices. It does not tell you what to do with your money, and it is not investment or tax advice. Nothing on this page is a recommendation about how to invest, when to retire, or how to hold your cash.