That's one of the most fundamental—and surprisingly misunderstood—questions in retirement planning.

Most people focus on how much they've saved, but the real question is how much income those savings can reliably produce year after year without running out.

Here's how to approach it from an educational standpoint.

1) Start with your spending, not your portfolio

The foundation of retirement income planning begins with your expenses. Ask: “What will it cost to live the way I want?”

You'll want to include both:

• Essential expenses: housing, food, healthcare, insurance, taxes, and utilities
• Discretionary expenses: travel, gifts, hobbies, dining, and leisure activities

Once you understand your total lifestyle cost, you can calculate the income gap—the amount your portfolio must generate after accounting for guaranteed sources of income like Social Security, pensions, or rental income.

2) The 4% rule—and why it's just a starting point

A common guideline says you can withdraw around 4% of your retirement savings each year (adjusted for inflation) with a high probability of not running out of money over 30 years.

For example, if you have $2 million saved, 4% suggests about $80,000 per year in withdrawals.

But that's just a rule of thumb. It doesn't account for:

• Market volatility (especially early in retirement)
• Taxes on withdrawals from pre-tax accounts
• Inflation spikes or rising healthcare costs
• Variations in spending patterns (often higher early in retirement, lower later)

Modern planning uses dynamic withdrawal strategies (sometimes called guardrail approaches), which adjust withdrawals up or down based on market performance and remaining portfolio value.

3) Factor in taxes and account types

Not all income is created equal. $100,000 from a Roth IRA is very different from $100,000 from a traditional IRA.

You'll need to estimate after-tax income, since tax treatment varies across:

• Tax-deferred accounts (traditional IRA, 401(k)): taxed as ordinary income
• Tax-free accounts (Roth IRA): tax-free withdrawals if qualified
• Taxable accounts: subject to capital gains and dividend tax rates

Coordinating withdrawals across these accounts can help you minimize taxes and extend portfolio longevity.

4) Longevity and inflation considerations

If you retire at 65, there's a strong chance one spouse could live into their 90s. That's 25–30 years of income needs—and inflation will slowly erode purchasing power.

A retirement income strategy must plan for growth to offset inflation while still generating reliable cash flow in the near term.

In summary: the amount of income your investments need to generate depends on your spending needs, tax picture, and withdrawal flexibility. Rather than asking, “How big should my nest egg be?”, ask: “How much sustainable income can my nest egg safely provide?”