How Much Monthly Income Will You Actually Need in Retirement?
Most people approach retirement with a savings number but not an expense number — and the savings number doesn't mean anything without the other one.
Most people approach retirement with a savings number in their head — a 401(k) balance, an IRA total, maybe a rough sense of what Social Security will pay. What they don’t have is the other number: the monthly expense number.
Without that, the savings number doesn’t mean anything. You can’t know if $800,000 is enough until you know what you’re trying to cover.
The two-sheet exercise
The simplest way to figure this out is what we call the budget sheet and the income sheet. We sit down with clients and build both — by hand, in plain numbers, no software.
The budget sheet lists what you actually spend in a month, broken into two columns: fixed and flexible.
Fixed expenses are the bills that show up every month whether you do anything or not — mortgage if any, property taxes, insurance, utilities, healthcare premiums, car insurance, groceries, phone, basic transportation. These are the numbers that don’t care if the market is up or down. In retirement, you need to know this number cold.
Flexible expenses are everything else — travel, gifts, dining out, entertainment, hobbies, helping the grandkids. These can flex up or down depending on the year.
Most Nashville families we work with have fixed monthly expenses somewhere between $4,500 and $8,000. The number varies based on whether the mortgage is paid off, what their healthcare situation looks like, and where they live in the metro.
The income sheet lists what you’ve got coming in, also in two columns: guaranteed and not guaranteed.
Guaranteed income is the kind that pays no matter what markets do — Social Security, pensions if you have one, any guaranteed income product you’ve put in place. This is the foundation.
Not-guaranteed income is everything else — withdrawals from your 401(k), IRA, brokerage accounts, rental income that depends on tenants paying, business income that depends on the business doing well.
Where the math gets uncomfortable
When we line up the two sheets, the question becomes simple. Does your guaranteed income cover your fixed expenses?
If yes, you have flexibility. Your investment portfolio can ride out market downturns because you don’t need to sell during a bad year to pay bills. You’re insulated.
If no, you have a problem. You’re going to be drawing from investments every single month to cover essential expenses — including during years when the market is down 30%. That’s the situation that ends retirements early.
Most people approaching retirement are in the “no” category and don’t know it. They’ve saved diligently for decades, but they’ve saved into accounts that don’t produce predictable income on their own. Converting savings into reliable monthly income is a separate problem from saving the money in the first place.
What to do about it
The gap between fixed expenses and guaranteed income is the gap that needs to be filled. There are several ways to do it, and they’re not mutually exclusive.
- Maximize Social Security timing. Claiming at 67 versus 62 can mean hundreds of dollars more per month for life.
- Build a guaranteed income strategy — a structured product that pays a predictable monthly amount, principal-protected, regardless of market conditions. The product category has evolved significantly and is worth understanding before dismissing.
- Adjust your portfolio drawdown strategy so you’re not selling growth assets during bad years.
The right mix depends on your specific picture — what you have, what you owe, who depends on you, what your spouse will need if you go first, what your health looks like, what you’re trying to leave behind.
The starting point
Before any of that, do the two sheets. Even rough numbers tell you a lot. If you don’t know your monthly fixed expenses within $500, you don’t know what retirement actually costs you yet — and that’s the first conversation worth having.
If you’d like help working through it, that’s what we do. Schedule a Discovery Meeting and we’ll build the two sheets together. No products, no pitches — just the math, in plain numbers.