Nobody believes me

It’s the chicken or egg thing. Which comes first, knowing how much income you have in retirement or setting a budget to see what you will spend?

I say there is no point of agonizing over a spending budget for retirement until you know what your income can reasonably be. Your spending cannot generate your income. Your income will limit your spending.

Fixating on a detailed budget is stressful and not productive. Besides, a budget can be thrown into chaos in any number of ways like the five things mentioned in this article. Focus on the big risks and plan for those.

The place to start when planning to retire is your current spending. With the one exception that you will pay off a mortgage immediately before retirement, your spending in retirement will be the same, not on the same things, but the same amount more or less. Some basic expenses, some discretionary and some of a unexpected and unplanned nature.

The last flap about my point of view came when my recent article on this topic was published on

Some critics said I was out of touch because my retirement income is not typical and because I have a pension. The fact that knowing your income is most critical has nothing to do with income level. The source of your income is a factor because those living off accumulated investments as opposed to a pension or annuity have a more difficult time, but they still are constrained by the income investments generate.

Here’s the thing. I suggested everyone knows how much they spend although not necessarily how they spend it, but that is secondary. They spend each month what is left of take home pay (after taxes) and after savings. Unless you are living by credit card not fully paid each month, that amount is what you spend on both basic and non-necessities expenses. What else can it be? People adjust their spending to their incomes. Sometimes too much🤑

If you are planning retirement, your goal is to generate income that is equal to your base income before retirement. Most people will do that using Social Security and what can be generated by their investments. The 4% method is common as a general way to determine income withdrawn from retirement funds.

For example, if you have or plan to accumulate $800,000 for retirement, a reasonable estimate is that can generate $32,000 in income. Add the family Social Security benefit to the $32,000 and that is your income, which will adjust for inflation to some extent. Your question is, how close is that to my current income, hence covering my current spending?

In my case I have a pension. My pension started in 2010 and will not increase. While my Social Security has increased modestly, most of that has been offset by Medicare premiums. In any case, my spending is limited to those sources of income.


  1. The best thing you can do before retirement is pay off the house, car and have zero debt. Then no matter what your retirement income, it will be much easier to enjoy retirement.


  2. Seems to be common sense to me. Everyone knows their income and expenses. If you don’t know your income and expenses, how can you budget? And what’s the point of a budget if your income won’t support it?


  3. Some people like to approach the problems in their lives from the top down, while others from the bottom up. As others have said, There are many roads to Dublin. Choose the best approach for your life.


  4. I believe you too, but I do have a small quibble with one of your assertions.

    You say “If you are planning retirement, your goal is to generate income that is equal to your base income before retirement.” “Your question is, how close is that to my current income, hence covering my current spending” – This is indeed helpful/essential information, but someone’s current income may be far higher than someone’s current (or anticipated) spending. This is an issue I have generally with articles that conclude someone needs x% of their income to retire. This is very individual.

    Some people are fortunate to have very high paying jobs, never live up to their income and possibly retire early. Others may have lower paying jobs, be wonderful savers and retire with plenty of money to cover spending well beyond their current income. Both can be very happy in retirement. And what about people who jump to new higher paying jobs a few years before retirement and just use the additional income to pump up their savings? It is rare for someone to spend their career at one or even a couple of jobs these days.

    So, is it worth having a “goal” of saving enough to generate income equal to base income before retirement? Sure. And for many it may be necessary for their lifestyle. But while having more than one needs is certainly better than the alternative, there are also many who would prefer to live on less than their income before retirement and start the journey a little sooner (I’m not talking about those trying to retire in their 30s 😉 )

    Thanks for the thoughtful post.


  5. Hey Quinn! I believe you. Reasonable explanations sometimes don’t reach those who believe we old people live in the past and just got where we are because our time was better than these times. History tell the story but they just want to erase it.

    Stay safe and healthy, Martin


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