The 2 Most Important Targets for Determining Your Retirement Income Number

(don’t forget to checkout the video of this blog too)

I talk to people every day about retirement.

I focus most of my energy helping people determine exactly how much retirement income they need to retire comfortably.

The process normally begins with this question:

“How much income do you think you’ll need on a monthly basis to live the lifestyle you want to in retirement?”

This question is often met with a lot of uncertainty…

And I think that’s normal.

It’s hard to know exactly how much income you’re going to need in retirement.

Retirement Income Planning is very seldom a fixed income number every single year; it’s often an income range with a lot of built-in flexibility.

You can often break your retirement income target into 2 separate categories:

✅ Retirement Income That is Absolutely Necessary

This is the non-negotiable income you need to pay bills, buy food, pay for healthcare, etc.

This is a number that you “have to have” every single month.

I often refer to this as you Retirement Income Floor (it’s the minimum amount of income you need to provide for your basic needs in retirement).

For some people, their Social Security Income may be enough to cover their income floor, but for a lot of people they’ll need some additional income to meet this target.

The second number is:

✅Desired “Lifestyle” Income in Retirement (beyond what’s simply necessary)

This number factors in vacations, going out to eat, country club memberships, new vehicles, etc. 🏖️ 🍷 ⛵️

This is the number allows you to live the lifestyle want in retirement (and this is the number I think you should base your plan around).

That doesn’t mean all of your retirement income needs to be “fixed, guaranteed income” through pensions or income annuities.

But, a lot of people like to meet at least their “income floor” with these sources of guaranteed income.

This ensures that income their basic expenses are always met without any reliance on the performance of the market (meaning their basic needs are not subjugated to any market losses in retirement).

You can certainly create and additional income stream to provide for your lifestyle goals as well, OR you can rely on the performance of the market for that additional retirement income.

I like a strategy that couples the two.

You don’t want too much guaranteed income because you sacrifice flexibility and the long-term growth potential of the market.

But, you also don’t want too much market exposure, or you are putting your retirement lifestyle at the mercy of market volatility.

Both are valuable in appropriate amounts.

And that’s exactly what I help people find…

It’s finding the balance between exactly how much income we HAVE TO HAVE and how much money we are comfortable leaving in the market for its potential upside?

The bottom-line is that we want to ensure that we NEVER run out of money in retirement first….

Once we’ve done that we want to leave ourselves maximum flexibility and long-term growth so that we can spend as much money as we would like to fully ENJOY retirement. ☀️

Let’s chat 💬😎