Methodology
Every formula, in plain language and in the exact numbers.
This page exists so you don't have to take "we show our work" on faith. Below is exactly how RetiSquare calculates Social Security, RMDs, taxes, and Medicare surcharges — and, just as important, exactly where it simplifies and what it doesn't attempt to model yet.
How the projection runs
RetiSquare simulates your finances month by month, from today through age 100, using three account buckets: taxable/cash, tax-deferred (traditional IRA/401k), and Roth. Each year it works out your income (Social Security plus any withdrawals), your expenses (living costs, health insurance or Medicare, taxes, debt, long-term care if you've added it), and covers the gap by drawing from your accounts in a fixed order:
- Taxable/cash first
- Tax-deferred next
- Roth last
That order isn't arbitrary — it's the standard sequencing recommendation for minimizing lifetime tax drag, since Roth withdrawals are the ones you least want to trigger early. Required minimum distributions (RMDs) are enforced on top of this order once you're old enough that they apply, even if you don't otherwise need the money that year.
One deliberate simplification worth naming directly: taxes and Medicare surcharges are calculated on a one-year lag — this year's income determines next year's tax bill and Medicare premium, which is how these systems actually work in real life (IRMAA in particular is explicitly based on your tax return from two years prior). We simplified that two-year lag to one year for modeling clarity, which is close enough to matter less than getting the mechanism itself right, but it's not an exact calendar match to the real IRMAA timeline.
Social Security
You can enter either your real 62–70 benefit table straight from your Social Security statement, or a single estimate at full retirement age (67) — the model derives the rest from there.
The numbers
- Claiming before 67: your benefit is reduced 5/9 of 1% per month for the first 36 months early, then 5/12 of 1% per month for any additional months earlier than that.
- Claiming after 67: your benefit increases 2/3 of 1% per month, up to age 70.
- Spousal benefits: up to 50% of the higher earner's full-retirement-age benefit, reduced on its own early-claiming schedule if the spouse claims before their own full retirement age — a steeper reduction in the first three years early than an individual's own benefit uses.
- The model always pays whichever is higher for a given spouse in a given year — their own benefit, or the spousal amount — matching how Social Security actually pays out.
Required minimum distributions (RMDs)
Once you reach your RMD age, you're required to withdraw a minimum amount from tax-deferred accounts each year, calculated using the IRS Uniform Lifetime Table — your account balance divided by a life-expectancy factor that shrinks as you age (26.5 at age 73, down to 6.4 at age 100).
The numbers
- Born 1959 or earlier: RMDs start at age 73.
- Born 1960 or later: RMDs start at age 75.
- RetiSquare applies whichever age matches your entered birth year — this isn't a flat rule.
Federal income tax
Ordinary income — tax-deferred withdrawals, RMDs, and the taxable portion of Social Security — is taxed using the 2026 single-filer federal brackets, after your standard deduction ($16,100, plus an additional $2,050 if you're 65 or older).
| Taxable income up to | Rate |
|---|---|
| $12,400 | 10% |
| $50,400 | 12% |
| $105,700 | 22% |
| $201,775 | 24% |
| $256,225 | 32% |
| $640,600 | 35% |
| — | 37% |
The temporary senior deduction: an additional $6,000 deduction applies at age 65+, phasing out at 6 cents per dollar of income above $75,000, and currently legislated to disappear after tax year 2028. RetiSquare applies and expires this deduction on that same schedule, rather than treating it as a permanent feature of the tax code.
Capital gains on taxable withdrawals
When you withdraw from your taxable account, RetiSquare estimates how much of that withdrawal is gain (versus a return of your original investment) using your cost-basis percentage input, and taxes only the gain — at long-term capital gains rates, stacked on top of your ordinary income.
The numbers
- 0% up to $49,450 of stacked income.
- 15% up to $545,500.
- 20% above that.
What this simplifies: RetiSquare uses one blended cost-basis percentage across your whole taxable account rather than tracking individual purchase lots — this matches how every major competitor we reviewed handles it (none do lot-level tracking in a consumer-facing planner), but it's still an estimate, not your actual per-lot basis.
How Social Security gets taxed
Up to 85% of your Social Security benefit can itself be subject to federal income tax, depending on your other income. RetiSquare uses the same "provisional income" method the IRS actually uses: your other taxable income plus half your Social Security benefit, compared against thresholds that determine what portion becomes taxable.
The numbers (single-filer, not inflation-indexed since 1984 — this isn't a RetiSquare simplification, these thresholds are genuinely fixed in the tax code)
- Provisional income under $25,000: none of your benefit is taxable.
- $25,000–$34,000: up to 50% becomes taxable.
- Above $34,000: up to 85% becomes taxable.
State tax
RetiSquare uses real state-specific tax rules for 13 curated states — full progressive brackets where the state has them (CA, NY, NJ, VA, OR, SC), and the correct flat rate where it doesn't (MA, MI, NC, GA, AZ, OH, CO) — automatically applies $0 for the 9 states with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) and the 4 states that fully exempt retirement income (IA, IL, MS, PA), and falls back to a flat-rate estimate you set yourself for every other state.
What this simplifies: we didn't attempt full 50-state bracket accuracy — no retirement planning tool we reviewed does. The 13 curated states cover the specific carve-outs that actually move the number (like Social Security exemptions); everything outside that list uses your flat-rate estimate as an intentional, narrower version of the same fallback every competitor in this category also relies on.
Medicare and IRMAA
Once Medicare is active, RetiSquare applies the standard Part B premium plus any IRMAA surcharge your income triggers — calculated per person, so a couple where both spouses are 65+ sees both premiums and both surcharges stack, based on the same household income.
| MAGI up to | Part B surcharge (added to the $202.90 standard premium) | Add-on |
|---|---|---|
| $109,000 | $0 | $0* |
| $137,000 | $81.20 | $14.50 |
| $171,000 | $202.90 | $37.50 |
| $205,000 | $324.60 | $60.40 |
| $500,000 | $446.30 | $83.30 |
| above | $487.00 | $91.00 |
* The standard $202.90 Part B base premium always applies, regardless of income tier — this column shows only the additional IRMAA surcharge.
Before 65: RetiSquare uses your entered monthly health insurance cost as a flat number for ages 62–64 — it doesn't estimate ACA marketplace premiums itself, since those vary heavily by state, plan tier, and subsidy eligibility. You're expected to enter your own estimate.
Survival-probability horizon (Premium)
Instead of assuming everyone lives to exactly one fixed age, RetiSquare uses real 2023 SSA period life tables to show the probability you're still alive at any given age — and, for couples, the probability at least one spouse is still alive, which is meaningfully later than either individual's own odds.
Monte Carlo simulation
Rather than a single fixed annual return, Monte Carlo mode runs 300 trials, each drawing a random annual return for every year from a normal distribution centered on your expected return with your chosen volatility — then reports the range of outcomes (10th, 50th, and 90th percentile ending balances) and what share of trials never ran out of money.
What this simplifies: returns are drawn independently each year (no modeled correlation between a bad year and the years around it, i.e. no explicit "sequence risk" clustering beyond what randomness alone produces), and the distribution is a plain normal curve, not a bootstrap from actual historical market sequences.
What RetiSquare doesn't model yet
Stated plainly, not buried: these are the things RetiSquare either simplifies more than the categories above, or doesn't attempt at all.
- Roth conversion strategy. RetiSquare doesn't model deliberately converting tax-deferred money to Roth in low-income years — a common advanced strategy for reducing future RMDs and taxes.
- Qualified charitable distributions. No modeling of using RMDs to satisfy charitable giving tax-free.
- Per-account growth rates. Taxable/cash balances use one rate; tax-deferred and Roth balances share a single rate rather than each having its own.
- State-specific credits beyond the curated list. Outside the 13 curated states, state tax is a flat estimate you provide, not a real bracket calculation.
- Massachusetts' millionaire surtax. The engine models Massachusetts as a flat 5% — it doesn't add the extra 4% surtax that applies to taxable income above roughly $1.1M. Low materiality for most users, but worth knowing if that applies to you.
- Net Investment Income Tax (NIIT). The 3.8% NIIT on investment income (including the taxable gain portion of a withdrawal) once MAGI exceeds $200,000 for a single filer isn't modeled. This can understate your tax bill in a high-income year with meaningful taxable-account gains.
- Exact per-lot cost basis. One blended percentage across your taxable account, not individual purchase-lot tracking.
The line RetiSquare tries to hold: if something meaningfully changes your number, we simplify it as little as we can and say so where it appears. If it's a genuinely advanced strategy that depends on your specific tax situation and timing, we say plainly it's not modeled — that's the point where the "worth a conversation with a financial planner" guidance is meant to kick in.