Calculator Inputs
Responsive layout: 3 columns large, 2 medium, 1 small.Example Data Table
These examples are illustrative only. Your estimate changes with return, taxes, and time horizon.
| Profile | Income | Years | Debts | Children | Estimated coverage |
|---|---|---|---|---|---|
| Single earner, two kids | $80,000 | 20 | $25,000 | 2 | $820,000 |
| Dual income, one child | $95,000 | 15 | $10,000 | 1 | $540,000 |
| Near retirement, no kids | $110,000 | 8 | $0 | 0 | $280,000 |
Formula Used
This calculator estimates a lump-sum amount that can fund an income stream for a chosen period, plus one-time costs, minus existing resources.
- After-tax income: Net = Income × (1 − TaxRate)
- First-year replacement need: P1 = Net × ReplacementRate
- Present value of growing income need:
- Offsets: spouse income is treated as a reducing cashflow for the selected years.
- Coverage needed: Max(0, PV − PVoffset + Buffer + OneTime − Resources).
- Real-rate mode: r = (1+return)/(1+inflation) − 1, similarly for g.
How to Use This Calculator
- Enter gross income and an effective tax rate.
- Choose a replacement rate and protection years.
- Add debts, final expenses, and education targets.
- Include existing savings and any current cover.
- Set return, inflation, and growth assumptions carefully.
- Submit to view results above the form.
- Download CSV or PDF to save and share.
Income replacement targets and cashflow reality
A practical target is replacing 60%–80% of after-tax income. This tool starts with your net income, then applies your replacement rate to set a first-year need. A $75,000 income with 18% tax and 70% replacement produces an initial income need near $43,050 per year. Adjust the rate upward when childcare, health costs, or a single-earner household increases essential spending.
Time horizon and the cost of long support
Protection years drive the largest swing in required cover. Extending support from 10 to 20 years can materially increase the present value of income needs because more annual cashflows must be funded. If your goal is coverage until children finish school, set a horizon that matches the youngest child’s timeline instead of using a generic number.
Return, inflation, and why real-rate mode matters
When inflation is high, nominal assumptions can exaggerate future needs and returns at the same time. Real-rate mode converts both return and income growth to inflation-adjusted rates, keeping comparisons consistent. For example, a 6% return with 3% inflation implies roughly a 2.9% real return. Small changes in discount rate can meaningfully change the present value across long horizons.
Offsets and resources that reduce coverage
Spouse income, existing savings, and existing cover all reduce the lump sum required. The spouse offset is treated as a limited-duration stream, so it lowers the present value for only the years you specify. Resources are subtracted after adding one-time needs, such as debts, final expenses, and education funding per child.
Liquidity buffer and safety margin for uncertainty
A buffer of 3–12 months helps cover near-term disruption, legal fees, and transition costs. The safety margin adds a controlled cushion (0%–30%) to reflect uncertainty around returns, job stability, or unexpected expenses. Use the chart above to see which levers dominate your estimate before you export results for review. For conservative planning, set growth to 0% and reduce return assumptions. This produces a baseline estimate that is easier to compare across scenarios.
FAQs
1) What does “coverage needed” represent?
It is the estimated lump sum that can fund your chosen income replacement period, plus one-time needs and a cash buffer, minus existing resources.
2) Why does the tool use after-tax income?
Households spend from net pay. Using after-tax income helps align the replacement target with actual living costs and reduces overestimation.
3) Should I enable inflation-adjusted rates?
If your return and growth assumptions are nominal, turning it on keeps comparisons consistent by converting both to real rates using your inflation input.
4) How should I choose the protection years?
Pick a horizon that matches your family goal, such as the youngest child reaching independence or the planned retirement date, then test a shorter and longer case.
5) How is spouse income handled?
It is treated as a reducing cashflow for the number of years you enter, lowering the present value of required funding during that period.
6) Why add a safety margin?
Markets, inflation, and expenses can deviate from assumptions. A margin adds a simple cushion so your plan is less sensitive to small forecasting errors.