Income Replacement Calculator
Find the payout that replaces a share of your income from safe investment returns.
This is an estimate, not insurance advice. Your actual coverage needs, plan costs, and payouts depend on your policy, insurer, and personal situation.
How it works
The idea behind income replacement is that a lump-sum payout gets invested, and the returns — not the principal — cover your family's living costs. Do it right and the money can last indefinitely, because you're spending the interest and leaving the nest egg intact.
Start with the slice of income you want to replace, say 70% of a $70,000 salary, which is $49,000 a year. Divide that by a conservative return rate you'd expect from safe investments — 4% gives you roughly $1.2 million of coverage to generate that income each year.
If you'd rather not assume a perpetual return, the tool also shows the simpler income-times-years figure: multiply the desired annual income by how many years you want it to last. That number is easier to grasp but assumes you'll draw down the whole balance over time.
Frequently asked questions
Why divide by the return rate?
Dividing desired income by the return rate tells you how big a lump sum you'd need so its investment earnings alone match that income. At a 4% return, every dollar of yearly income needs about $25 of principal behind it.
What return rate should I assume?
Use a conservative figure you're confident about long term — many people pick 3% to 5% to reflect safe, income-focused investments after inflation. A lower rate demands a bigger payout, so err on the cautious side rather than assuming stock-market returns.
Which number should I actually use?
The return-based figure suits families who want income to last indefinitely without touching principal. The income-times-years figure fits a fixed horizon, like replacing pay only until kids finish school. Pick the one that matches your plan.