How Much Retirement Income Do You Really Need?
When business owners approach retirement, they often show me a number. It might be the value of their investment accounts—or what they think their business could sell for—and ask the golden question:
“Is this enough to retire?”
And my honest answer is always: “It depends.”
You could have $10 million saved, but if you spend $1 million a year, it may not be enough. On the other hand, someone with far less might be perfectly positioned to retire comfortably. It's not just about what you’ve accumulated—it’s about how you plan to use it.
So instead of asking, “Do I have enough?”
A better question might be:
“How much income will I need each year to live the retirement I want?”
In this article, you’ll learn how to:
Define realistic lifestyle spending based on your current habits and future goals
Project cash flow for retirement—using the same logic you’d apply to a business
Understand how taxes and account types (Roth, IRA, brokerage) impact what you keep
Build a withdrawal strategy that minimizes costly surprises and keeps your income consistent
Know whether you’re on track—or if adjustments are needed
Sometimes the numbers bring peace of mind. Other times, they bring clarity that change is needed. Either way, information leads to confidence—and that’s what this article is designed to deliver.
Why Guesswork Creates False Security
One of the biggest assumptions I see from pre-retirees is this:
“I’ll probably spend less in retirement than I do now.”
That might be true—but often, it’s not. In fact, most surprises fall into one of two camps:
They spend more than expected, putting their long-term plan at risk.
They spend far less than they could, missing out on experiences they easily could have afforded.
I have a client with a net worth north of $20 million who lives on just $150,000 a year. Financially, they’re more than fine—but I sometimes wonder: Is frugality keeping them from truly enjoying the life they worked so hard to build?
These kinds of misalignments—spending too much or too little—are avoidable. With the right plan, you can design a retirement lifestyle that’s both sustainable and fulfilling.
Rules of thumb like “spend 80% of your current income” or “withdraw 4% a year” are everywhere. But the truth is, they rarely reflect your unique goals, lifestyle, and tax situation.
Instead of guessing, the better approach is to ask thoughtful questions. Questions that help you uncover what retirement might actually look like—and cost.
Let’s start there.
Know Thyself: Rethinking Your Spending Habits
One of the smartest things you can do before retiring is to get brutally honest about your spending. Not just today’s spending—but how that might shift when your work life winds down.
Start by asking yourself some key questions. This kind of reflection helps you account for:
Unexpected expenses (like a new roof, vehicle, or health-related costs)
Lifestyle goals (such as annual travel, home upgrades, or seasonal living)
Shifting obligations (mortgages paid off, savings no longer needed, or new grandkid-related expenses)
Here are a few questions that can give you clarity and bring hidden costs—or opportunities—into view:
What does it cost to run your life today?
Which of those costs go away in retirement? (e.g., mortgage, student loans, business payroll)
What new expenses could take their place? (e.g., healthcare premiums, travel, hobbies, grandkids)
If you stopped working tomorrow, how would you spend your time next week?
Travel? Golf? Volunteering? Consulting? Sleeping in?
Will you stay in your current home—or are you thinking of downsizing or relocating?
Will you contribute to family milestones—like weddings or college tuition?
Do you have health concerns that could raise future costs?
What are your top five expenses today? Will they still exist—or be replaced by new ones?
What have you been putting off while running your business?
A kitchen remodel? A dream trip? A once-in-a-lifetime experience?
What work-related costs will disappear? (e.g., commuting, wardrobe, client meals, staff)
Are you more focused on enjoying your wealth—or preserving it for your family?
Pro Tip: Retirement should feel like a reward—not a restriction. If your plan is built on unrealistic cuts, you might be setting yourself up for frustration instead of freedom.
Money In: Identifying Sources of Income
This is usually the easy part of a retirement cash flow plan—tracking where your income will come from.
In retirement, most people have a mix of a few key sources:
Taxable investment income (interest, dividends, capital gains)
Tax-deferred income (RMDs from IRAs or 401(k)s)
Tax-free income (Roth IRA withdrawals)
Fixed income (Social Security, pensions, annuities)
Other sources (rental income, trust distributions, part-time work)
Here is an example of how I structured my cash flow spreadsheet.
You can set up your spreadsheet to track these income streams monthly, then simply multiply by 12 to get an annual estimate. At this stage, just focus on gross income—what’s coming in before taxes.
We’ll tackle taxes in the Money Out section, since different income types are taxed in different ways (ordinary income vs. capital gains). But for now, we’re building the foundation of your cash flow—what’s coming in, and when.
Money Out – Today
Now that you’ve explored your potential retirement lifestyle, it’s time to get grounded in the numbers:
Where does your money go today—and how might that change after you retire?
There are plenty of tools out there to help track your spending:
I use RightCapital for my clients.
Other solid options include YNAB (You Need a Budget) and Simplifi.
These apps typically require linking your accounts, which offers automation but may not be everyone’s cup of tea. If you’d rather keep things private or hands-on, a simple spreadsheet or notebook will do just fine. It takes a little more work, but it gets the job done.
Personally, I use both. I want to know—down to the dollar—where my money is going. And I encourage you to get just as intentional.
If you’re a small business owner, this should feel familiar. You’ve built cash flow statements for your business. Now it’s time to build one for your life.
Think of retirement as your next business—and you’re the CFO.
Before we get into retirement estimates, we first need a clear view of your current spending. So let’s start with some foundational spending categories and work from there.
Taxes: The Hidden Variable in Retirement Planning
Most sources of retirement income come with a tax impact—but not all are taxed the same way.
Ordinary income (like RMDs, Social Security, pensions) is taxed at your regular federal and state rates.
Capital gains (from investments in taxable accounts) are often taxed at lower, more favorable rates.
When I build custom cash flow spreadsheets for clients, I include a section that estimates the net-of-tax income. Here's an example based on a married couple from North Carolina in 2025.
The "Net of Taxes" figure is calculated by:
Starting with total gross income
Subtracting tax-deferred savings (if any)
Applying the standard deduction (if they’re not itemizing)
Factoring in their effective federal tax rate
Accounting for the NC state income tax
This number is helpful when analyzing Roth conversions or figuring out how much to contribute to tax-deferred accounts while still working.
Below that, I also show the couple’s actual net income—the real dollars that hit their bank account each month. Comparing these two numbers gives us insight into whether they’re paying enough in taxes throughout the year, or if a refund—or surprise tax bill—might be on the horizon.
Spending Categories: Get Real About Where the Money Goes
This part of your cash flow plan is where things get personal—because how you spend your money is directly tied to your goals, values, and lifestyle.
There’s no one-size-fits-all here. But what I’ve found helpful is starting with broad categories, then breaking them into more detailed subcategories for better clarity.
Here are the main categories I typically use:
Home
Insurance
Vehicle
Health & Fitness
Personal
Savings (pre-retirement)
Discretionary or Fun Spending
You can stop there if that’s all the detail you need. But if you want a clearer picture of where your dollars are going, it helps to go deeper.
For example, under Home, I’ll often track:
Mortgage or Rent
Utilities – Electric, Gas, Water
TV / Internet
Home Maintenance
Cleaning Services
Real Estate Taxes
Security System
HOA Fees
You can do this for each category—as granular as you want. The goal is to build awareness, not overwhelm yourself.
One word of caution: Be honest.
Just like golfers who “forget” a stroke or two, we tend to mislabel expenses in our own favor. You might go to the store for milk and eggs, but come out with candles, cookies, and a dog toy. That’s not groceries—it’s discretionary spending.
There’s nothing wrong with treating yourself. But if you fudge the numbers, you’re only hurting your future self. Good data leads to good decisions.
Cash Flow – Estimating Year 1 of Retirement (and Beyond)
Now that you’ve mapped out your income and expenses today, it’s time to project how things might change when you retire.
Start by adding a new column to your cash flow spreadsheet labeled “Year 1 of Retirement.”
Then revisit the questions we discussed earlier and think carefully about how each income and expense category might shift.
Ask yourself:
What income sources will disappear? (e.g., wages, business income)
What new income will begin? (e.g., Social Security, RMDs, annuities)
Will your tax situation change?
Which expenses will shrink—or grow?
Should you create accruals for irregular but inevitable costs like replacing a car, roof, or HVAC?
Once Year 1 is mapped out, zoom out.
Your first 5–10 years of retirement may look relatively stable, but life has chapters:
Years 8–14: Medical costs may increase, while travel may taper off. You might downsize your home or simplify your lifestyle.
Years 20–30: You may move closer to family, require caregiving support, or accelerate your giving to loved ones or charities.
Everyone’s retirement looks different, but one thing’s for certain: your spending habits will change. Planning ahead gives you the best chance at staying in control—financially and emotionally.
You don’t need to project 30 years all at once. That’s unrealistic and often unnecessary.
Instead, focus on building a solid five-year forecast. Update it as your lifestyle, health, or goals evolve.
Your health will likely be your biggest financial wild card—and since it’s unpredictable, trying to plan around every possible scenario decades in advance isn’t a good use of time. What is helpful is creating a flexible plan that adjusts as you go.
Cash flow planning can be complex—but it doesn’t have to be overwhelming.
With a small weekly time commitment, anyone can build a system that helps them feel more confident and in control.
Bonus Insight: Tax Location Drives Smart Withdrawal Strategies
One of the most overlooked parts of retirement income planning isn’t how much you’ve saved—it’s where you’ve saved it. Saving in the right places can often help you avoid hidden expenses you could encounter if not planned appropriately.
This is where many plans fall apart. People focus on the total account balance, but ignore the tax and health care penalty consequences of where the dollars live.
A well-structured retirement portfolio typically includes a mix of:
Tax-deferred accounts (like IRAs and 401(k)s): taxed as ordinary income when withdrawn
Tax-free accounts (like Roth IRAs): grow and come out tax-free
Taxable brokerage accounts: taxed on interest, dividends, and capital gains—often at favorable rates
Why this matters:
Pulling too much from a pre-tax IRA can push you into a higher tax bracket—or trigger Medicare IRMAA surcharges.
Roth withdrawals can be used strategically to avoid tax spikes.
Taxable accounts offer flexibility for one-time expenses, gifts, or lifestyle upgrades.
A smart withdrawal strategy, coordinated across all three account types, can reduce your lifetime tax burden and stretch your portfolio further.
Bottom line: It’s not just about how much you take in retirement—but where you take it from. And that decision can mean the difference between running out of money... or running out of worries.
Next Steps: Clarity Leads to Confidence
After identifying your net cash flow figure—both for where you stand today and where you’re headed in retirement—you should finally be able to answer the question that started this journey:
“Do I have enough to retire?”
Sometimes, the answer brings peace of mind. Other times, it reveals a gap that needs attention.
But either way, information inspires clarity. And clarity inspires confident action.
The more you know, the more control you have over the decisions that shape your future.
This article was meant to reframe how you think about retirement income—not just in terms of savings, but how those dollars turn into a reliable, sustainable lifestyle.
We’ve walked through:
Defining your lifestyle spending
Organizing your cash flow by category
Factoring in taxes and account types
Estimating income for Year 1 and beyond
It may seem straightforward—but retirement income planning is nuanced and deeply personal. For business owners especially, it requires a mindset shift—from building a business to managing your life’s next “profit engine.”
This is where working with a qualified financial professional can bring tremendous value.
When done right, a personalized plan shows you:
Your estimated net retirement income
Where your dollars are coming from—and how they’re taxed
Whether you’re on pace to meet your retirement goals or need to make some course corrections
Think of this like reviewing your business’s financials. You’re used to measuring net profit. Now it’s about measuring net lifestyle—what you can actually live on and enjoy.
With the right plan in place, you’ll go from “I hope I have enough” to “I know I do.”
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
Our Fiduciary Mission:
At Integritas Financial, we specialize in helping small business owners navigate the complexities of their financial lives, providing fee-only financial planning services with a fiduciary responsibility. Our mission is to serve as your trusted partner, offering personalized guidance that aligns with your unique goals and the demands of running a business.
We work closely with business owners to address critical financial areas, including business exit strategies, tax planning, retirement planning, asset protection, estate planning, and coordinating with your team of professional advisors. Whether you’re preparing for a business sale, planning for succession, or balancing personal and professional financial priorities, we help you build a comprehensive strategy tailored to your needs.
At Integritas, your financial success is at the heart of everything we do. As a fiduciary firm, we are committed to acting in your best interests, providing transparent advice without the pressure of commissions or product sales. We believe in empowering you to make informed decisions by simplifying complex financial matters and delivering solutions designed to support your long-term prosperity.
Whether you’re in the early stages of growing your business or preparing for a major transition, Integritas Financial is here to help you manage the intersection of business and personal finance with confidence. Let us partner with you to create a roadmap for your success, so you can focus on what you do best—running your business.