How Much Retirement Income Do I Really Need?

How much retirement income do you need? For most people, the honest answer is: enough to cover the monthly expenses you have right now, minus the work part. If you spend $6,500 a month today, your job in retirement is to build about $6,500 a month in income from Social Security, your savings, and any other sources. The size of your nest egg matters, but it's a means to that monthly number, not the goal itself.

That reframe changes almost everything about how you plan. The video below walks through six things I want retirees to understand about income, and the sections here update every figure for 2026 and answer the questions clients actually ask me in our office.

▶ Video: youtube.com/watch?v=7iYiIN_oB7k, “6 Things You Need to Know About Retirement Income (Forget the Magic Number)”

Watch: Patrick Shope on why retirement income beats chasing a magic number.

How much retirement income do I need, really?

Start with today. Look at what leaves your account in a normal month: the mortgage or rent, groceries, insurance, the car, a little travel. Add it up. That's the paycheck you're trying to recreate.

Here's the thing people get backwards. They obsess over whether they've saved a million, or two million, or whatever number a magazine told them. Americans said in one 2025 survey that they believe they need about $1.26 million to retire comfortably (Source: Northwestern Mutual, 2025 Planning & Progress Study), and that number is really just a feeling, not a plan. Meanwhile the actual question sits right in front of them on their bank statement. If you need $5,000 a month to live the way you want, then you need to create $5,000 a month. That's it. The lump sum is only useful once you know the income it has to produce.

If you'd rather approach it from the savings side too, I've written separately about how much money you actually need to retire. But the income question is the one I'd start with.

What if I have to retire earlier than I planned?

This is the part almost nobody budgets for. Full retirement age is 67 for everyone born in 1960 or later, and people plan as if they'll work right up to it. Life doesn't always cooperate. A large share of retirees report leaving the workforce earlier than they expected, often because of a health issue, a company reshuffle, or caring for an aging parent.

So the smart move is to plan for flexibility instead of perfection. Don't just ask what happens if you retire at 67. Ask what you'd do if you had to stop at 62. When you know you could handle an early exit, you spend your last working years from a position of strength instead of hoping nothing goes sideways. That's not pessimism. It's giving yourself room.

Where does retirement income actually come from?

People picture retirement as one big bucket they slowly drain. It's closer to three streams feeding one river. You've got Social Security, you've got your 401(k) and IRA money, and you've got anything else, a pension, rental income, part-time work.

Let me show you the math with a composite couple we'll call Marv and Lois. They want about $6,500 a month in retirement. Between them, Social Security will bring in roughly $4,000 a month. That leaves $2,500 a month, or $30,000 a year, for their portfolio to cover. If they've saved around $750,000, drawing $30,000 works out to a 4% withdrawal rate, which the original research on the topic found held up across long retirements (Source: William Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, 1994). The absolute size of their savings matters far less than how these three streams fit together to hit $6,500.

The 4% figure is a starting reference, not a promise, and how much you can safely pull depends on your mix and your flexibility. I go deeper into that in how much you can withdraw in retirement.

Should I delay Social Security or spend my savings first?

Here's a distinction that trips people up. When I suggest delaying Social Security, folks hear "wait to spend money." That's not it. You're choosing to spend from savings first while your future benefit keeps growing. Same lifestyle, different funding source for a few years.

The tradeoff is straightforward. Claim at 62 and your check is about 30% smaller, but you collect it for extra years. Wait past your full retirement age and you earn delayed credits of 8% per year up to age 70, which buys you a bigger check for the rest of your life. The maximum benefit at full retirement age in 2026 is $4,152 a month, and benefits get a 2.8% cost-of-living bump this year.

So if you retire at 63 with money in the bank, you can live off savings and bridge the gap until Social Security starts later. When it finally kicks in, that monthly benefit is higher, and it lasts as long as you do. For a married couple, the larger benefit also becomes what the surviving spouse inherits, so delaying can quietly protect the one left behind. That's a point I wish more couples weighed before grabbing the early check.

How much should I budget for healthcare?

Healthcare sounds terrifying until you put it in monthly terms. One widely cited estimate puts total lifetime healthcare spending for a healthy 65-year-old retiring today at around $172,500 (Source: Fidelity 2025 Retiree Health Care Cost Estimate), which spreads out to somewhere in the neighborhood of $650 to $800 a month. That's less than what a lot of people pay for a car and its insurance. And it isn't a brand-new expense landing on you. It's replacing the premiums and out-of-pocket costs you already carry through work.

Here are the 2026 pieces to plan around:

• Medicare Part B: the standard premium is $202.90 per month per person in 2026 (Source: CMS, Centers for Medicare & Medicaid Services, 2026 Medicare Parts A & B premiums). Higher-income retirees pay more through IRMAA surcharges.
• Supplemental coverage: a Medigap or Advantage plan plus Part D adds more on top. Budgeting a few hundred dollars per person per month is a reasonable planning range.
• Out-of-pocket: deductibles, copays, dental and vision that Medicare doesn't fully cover.

If you're still a decade out, setting aside even a couple hundred dollars a month now builds a real cushion by the time you're 65. The point isn't to scare you. It's to size the expense honestly so it doesn't ambush your income plan.

How should my investments change once I retire?

While you're working, you're playing offense. Growth is the goal, and you've got a paycheck covering the bills, so a rough market year is uncomfortable but survivable. Once you retire and start pulling money out for living expenses, the game shifts to defense.

You still need some growth, because a retirement can run 20 to 30 years and inflation doesn't retire when you do. But now you also need stability and income. That often means holding some bonds, maybe some dividend-paying stocks, and keeping a year or two of expenses in cash so you are less likely to need to sell investments at the worst possible time, during a down market. You're not swinging for home runs anymore. You're just trying to get on base, over and over, for decades.

Work backward from what you spend

Retirement planning is really just life planning with a longer runway. You already know what it costs to live the way you like. Estimate what that looks like in retirement, then work backward to see how Social Security, your savings, and any other income can add up to it. When you frame it as replacing a paycheck instead of hitting a mystery number, the whole thing gets a lot less mysterious.

If you want help mapping your own three streams against your real monthly expenses, that's exactly the kind of thing we do together. You can start a conversation with us and we'll look at your specific numbers.

Retirement isn't about having enough money to stop working. It's about having enough income to keep living. Once you make that shift, everything else starts to make a lot more sense.

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