How Much Income Will I Need in Retirement?
It's one of the most common questions I hear: "Will my money last?"
And honestly, it's the right question to ask. Most people spend decades saving for retirement without ever really knowing what number they're aiming for. They contribute to their 401(k), maybe max out an IRA, and hope it all works out. But hope isn't a strategy.
So let's talk about how to actually think through this.
Start With What You're Spending Now
The simplest starting point is your current lifestyle. What does it cost you to live today? Not what you earn, but what you actually spend.
For most people, retirement expenses end up being somewhere between 70% and 90% of what they were spending while working. Some costs go down (commuting, work clothes, payroll taxes). Others go up (healthcare, travel, hobbies). And some stay roughly the same (housing, food, utilities).
If you're not sure what you spend, that's the first thing to figure out. You can't plan for a number you don't know.
Factor In What Changes
A few things shift in retirement that people often overlook:
Healthcare is a big one. Before Medicare kicks in at 65, you're on your own for insurance. And even after 65, Medicare doesn't cover everything. Premiums, supplements, prescriptions, and out-of-pocket costs add up.
Taxes don't disappear either. Depending on where your money is (traditional IRA, Roth, brokerage accounts), your withdrawals may be taxed differently. How you pull money out matters just as much as how much you have.
And then there's inflation. What costs $5,000 a month today won't cost $5,000 a month in 20 years. Your income plan needs to account for that.
The "25x Rule" as a Starting Point
You may have heard of the 4% rule. The idea is that if you withdraw 4% of your savings each year, your money should last about 30 years. Working backward, that means you'd need roughly 25 times your annual expenses saved.
So if you need $60,000 a year in retirement income and Social Security covers $24,000 of that, you'd need to generate $36,000 from your own savings. Multiply that by 25 and you get $900,000.
Is that a perfect formula? No. But it's a reasonable starting point for back-of-the-envelope math.
The Real Answer: It Depends
Here's the truth. There's no single number that works for everyone. It depends on when you retire, how long you live, what your expenses look like, what income sources you have (Social Security, pensions, rental income), and how your money is invested.
It also depends on how much risk you're comfortable with. Some people are fine staying in the market and riding out volatility. Others want the peace of mind that comes from knowing they'll get a check every month no matter what.
That's where strategies like Fixed Indexed Annuities come in. They can create a guaranteed income stream that you can't outlive. Not right for everyone, but for a lot of people, it takes a huge weight off their shoulders.
What To Do Next
If you're not sure where you stand, here's what I'd suggest:
First, get clear on what you're actually spending. Track it for a month or two if you need to.
Second, add up your guaranteed income sources (Social Security, pension if you have one).
Third, figure out the gap. That's the amount your savings need to cover.
And if you want a second set of eyes on your plan, that's what we're here for. We'll look at what you have, help you understand your options, and give you honest feedback on where you stand.
No pressure, no jargon. Just a conversation.
