As a financial advisor, one of the most common and important questions I hear is:
“How much income will I need in retirement?”
While there’s no one-size-fits-all answer, understanding the key variables and strategies can help you retire with confidence and peace of mind.
The 70-80% Rule (And Why It’s Just a Starting Point)
A common rule of thumb suggests you’ll need 70% to 80% of your pre-retirement income to maintain your current lifestyle in retirement. That estimate assumes certain costs like payroll taxes, commuting, and saving for retirement will go down or disappear once you stop working.
But this is just a ballpark figure. For some people, 80% won’t be enough, especially if you plan to travel, help family financially, or cover significant healthcare costs. Others may live comfortably on less.
The Real Question: What Will Retirement Look Like for You?
The income you’ll need depends on your personal vision for retirement. Ask yourself:
- Do I plan to downsize or stay in my current home?
- Will I travel or pursue expensive hobbies?
- Will my mortgage be paid off?
- Will I have other debts paid off?
- Will I have an ongoing car loan?
- What are my healthcare expectations or concerns?
- Will I work part-time or consult?
These questions help build a retirement budget based on your lifestyle, not just an industry average.
Mapping Out Your Retirement Income Sources
Once you estimate your expenses, the next step is calculating your income streams. Common sources include:
- Social Security
- Pensions (if available)
- 401(k)s, IRAs, and other savings
- Taxable brokerage accounts
- Investment income
- Part-time work or rental income
The 4% Rule: Still Useful, But Use with Caution
The “4% rule” suggests you can withdraw 4% of your portfolio in the first year of retirement, increasing slightly each year for inflation. It’s a helpful benchmark, but it may be too conservative or too aggressive depending on:
- Market conditions
- How long you plan to live in retirement
- Your risk tolerance
Customized withdrawal strategies are often more effective.
Don’t Forget Inflation and Healthcare
Two major risks in retirement planning are:
- Inflation: It erodes your purchasing power over time. Your income plan should include inflation-adjusted numbers/planning.
- Healthcare costs: These often rise as we age. Budgeting for Medicare premiums, out-of-pocket costs, and long-term care is essential.
Bottom Line: Income Planning is Personal
Instead of asking, “How much income does the average retiree need?” ask:
“How much income do I need to live the retirement I want?”
A retirement income plan should be personalized, flexible, and updated regularly. As a financial advisor, I work with clients to help build strategies that reflect their lifestyle, tax situation, and long-term goals.
Let’s Build Your Retirement Roadmap
If you’re within 5–10 years of retirement, now is the time to create a detailed income strategy. Reach out if you have any questions. Together, we can design a retirement income plan that helps you retire with clarity and more confidence.
Ready to learn more? Get started by
requesting a complimentary initial consultation whenever it’s convenient for you.
Read more articles by Ryan Johnson