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Retirement Income Planning, “How To” or “How Much”?

I recently searched the terms “Retirement Income Planning” on the web and found that the majority of returned searches focused primarily on “How to” generate retirement income, with only a few posts beginning with a more logical question–“How much” income do you need?

Certainly there is no shortage of opinions on how to generate retirement income. Academics, economists, advisors, and insurance professionals have broad, and often polarizing, opinions. Income generation ideas include: systematic withdrawals, flooring strategies, bond ladders, dividend investing, and annuitization. The debate continues into the wealth management field as to which investment strategy is best suited for the majority of retirees.

As important and interesting as these conversations may be (all depends on what you find interesting!), these varying opinions may fail to reach reader’s expectations because they are missing a critical piece of information—“How much income do you actually need and desire to have in retirement?”

The amount of income you plan to generate from savings, along with your views toward growth and safety, should have a substantial influence on determining the best path to create a suitable stream of income in retirement. In other words, there is no universal strategy for the masses, only what is right for you.

So how much income should you plan on replacing?

To help uncover your retirement income number, grab a pen and paper and complete the following exercise:

Let’s begin by calculating the essential and lifestyle expenses you anticipate in retirement (what you expect to spend). Take that number and subtract your anticipated Social Security and pension income (what you expect to receive before using your savings). If you have not recently estimated your Social Security benefits, you can calculate expected benefits at For a more detailed analysis of the claiming options available to you through Social Security, please contact us for a complimentary Social Security Analysis.

If you complete the calculation above and your expenses exceed your base income, then you have an income shortfall.  With this figure, you’ve likely pinpointed how much income you’ll need to start producing from your savings to sustain your desired quality of life.

So, with a detailed budget and a clear understanding of your expected Social Security and pension income, you will be more prepared for a thorough “How To” conversation with your financial planner.