The income-replacement method is the simplest way to estimate life insurance coverage: multiply your annual income by a number of years. The math is easy. The hard part — and the part most calculators gloss over — is picking the number of years in the first place. This guide walks through how to actually choose it, why the choice matters more than people expect, and how it fits alongside the other pieces of a fuller estimate.
You'll often see life insurance marketed with a flat multiple like "10x your income." That's really just income replacement with the years number hard-coded to 10, regardless of your family's actual situation. A 30-year-old with a newborn and a 55-year-old with adult children have very different real replacement needs, even at the same income — using an editable years input instead of a fixed multiple lets the estimate reflect that. The marketing appeal of a flat multiple is that it's memorable and requires no thought; the tradeoff is that it can badly overstate or understate what any specific household actually needs.
Push it higher if you have young children, a stay-at-home spouse with no independent income, significant debt beyond the mortgage, or a single-income household. You might use a shorter window if you have substantial existing savings and investments, a working spouse with a stable independent income, no dependents, or you're closer to a planned retirement date where other assets take over. It's worth reassessing this number after any major life event — a new child resets the dependency clock, while a paid-off mortgage or a spouse returning to full-time work can shorten the realistic window considerably.
At $60,000 in annual income, the years number changes the estimate substantially:
| 5 years | $300,000 |
| 10 years | $600,000 |
| 15 years | $900,000 |
| 20 years | $1,200,000 |
There's no universally "correct" number on this table — the right choice depends on your household's actual dependency window, not a formula. That's exactly why our calculator makes years an editable input rather than a fixed constant. Note how much the total swings between the 5-year and 20-year columns at the exact same income — a fourfold difference in coverage driven entirely by one assumption most flat-multiple rules never ask you to think about.
Two households earning identical $70,000 incomes can reasonably land on very different years figures. A couple in their early 30s with a 1-year-old might reasonably choose 18 years — roughly the time until that child finishes high school — producing a $1,260,000 income-replacement figure. A couple in their late 40s with a child two years from finishing college, and a spouse with an independent income and a solid retirement account, might reasonably choose 5 years, producing $350,000. Both are legitimate applications of the same method; the difference isn't a mistake, it's the whole point of making years an editable input rather than a fixed constant.
There's no single right answer, but most people use gross (pre-tax) annual income as a simple, consistent starting point, since it's the number on a pay stub or tax return and it builds in some cushion. If you'd rather be more precise, you can use your actual take-home pay instead — just be consistent about which figure you use if you revisit the calculation later, so you're comparing apples to apples over time.
On its own, income replacement doesn't account for your mortgage, other debts, or specific goals like education funding. For a more complete number, combine it with the other DIME components, or read the full pillar guide. If $500,000 is the number you keep seeing referenced as a typical policy size, our dedicated page on that question shows how income-replacement math alone can already exceed it for a moderate-to-higher earner.