By A.B. Ridgeway, EA, MBA, CPWA®,CDFA®
One of the most common questions I hear from new retirees is:
“How much do I need invested to generate income in retirement?”
It’s a fair question—and an important one.
Because once you retire, your paycheck stops… but your life doesn’t.
Unfortunately, most people are given vague answers, generic rules of thumb, or advice that doesn’t actually fit their situation. In reality, replacing your paycheck in retirement is not about guessing. It’s about structure, planning, and understanding how income really works.
Let’s break it down.
The First Thing to Understand: Retirement Is an Income Problem, Not an Investment Problem
During your working years, your job provided income and your investments grew in the background.
In retirement, that flips.
Now your investments must produce income. That means your focus should shift from:
- How much am I making?
to - How much am I receiving?
This is where many retirees get tripped up.
A large account balance does not automatically mean reliable income.
Step 1: Identify Your True Income Gap
Before you can know how much you should invest, you need to know how much income you actually need.
Start here:
- List your monthly expenses
- Subtract guaranteed income sources such as:
- Social Security
- Pensions
- Annuities (if applicable)
What’s left is your income gap.
This gap is what your investments must replace.
Example:
- Monthly expenses: $6,000
- Social Security: $2,500
- Pension: $1,000
- Income gap: $2,500 per month
That $2,500 is your retirement paycheck replacement target.
Step 2: Understand How Portfolios Generate Income
Your investment portfolio can generate income in three ways:
- Dividends
- Interest
- Strategic withdrawals
The key is sustainability.
You don’t want income that looks good for a year and disappears in a downturn. You want income that is structured, intentional, and resilient.
This is where personalized planning matters.
There is no universal number that works for everyone.
Step 3: The Math Behind Replacing Your Paycheck
Let’s keep this simple.
If you need $30,000 per year from your investments, and your portfolio can safely generate 4%, then:
$30,000 ÷ 0.04 = $750,000
That means you would need approximately $750,000 invested to generate $30,000 per year in retirement income.
But here’s the catch…
That 4% is not guaranteed.
Markets change.
Taxes matter.
Your spending will shift.
This is why rules of thumb are dangerous.
Real retirement planning accounts for:
- Taxes
- Inflation
- Market volatility
- Longevity
- Healthcare costs
This is where a financial advisor adds real value.
Why Most Retirees Are Given the Wrong Advice
Many retirees are told:
- “Just take 4%.”
- “You’ll be fine.”
- “Don’t worry, you have enough.”
That’s not planning. That’s hoping.
Hope is not a strategy.
Retirement requires:
- Intentional income design
- Risk management
- Tax planning
- Ongoing adjustments
This is what separates confident retirees from anxious ones.
The Role of a Financial Advisor in Retirement Income Planning
A financial advisor should not just manage your investments.
They should help you:
- Build a retirement paycheck
- Stress test your plan
- Align withdrawals with taxes
- Protect you from emotional decisions
- Adjust as life changes
If your advisor has never shown you how your income is structured, that’s a red flag.
The Bottom Line
Replacing your paycheck in retirement is not about hitting a magic number.
It’s about:
- Knowing your income needs
- Understanding your income sources
- Structuring your investments intentionally
- And having a plan that adapts over time
Retirement is not the end of financial planning.
It is the most important phase of it.
Want a Personalized Retirement Income Plan?
If you are:
- Newly retired
- Retiring in the next 1–5 years
- Unsure how much you should invest
- Or want clarity around your income
I’d be happy to help.
Schedule a consultation with A.B. Ridgeway Wealth Management and let’s build a plan that gives you confidence, not confusion.
Click Here to Speak With A Financial Advisor: Click Here To Pick A Time
About the Author
A.B. Ridgeway, CPWA® is the founder of A.B. Ridgeway Wealth Management and host of The Ridgeway Report. He specializes in helping retirees and pre-retirees create reliable income, invest with clarity, and make confident financial decisions.
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About The Ridgeway Report:
As Christians, we were taught to be good stewards over our tithing and giving to the less fortunate. But when it came to our personal finances and investing we were left clueless on what the Bible says. What does the Bible say about managing debt, leaving a legacy, investing, and planning for your retirement? Mr. Christian Finance answers these and many other questions because we want to teach you how to become rich and righteous!
Meet A.B. Ridgeway:
A.B. Ridgeway, MBA, CPWA®️ (info@abrwealthmanagement.com) is the owner and Christian Financial Advisor with A.B. Ridgeway Wealth Management. With a decade in the finance industry, his goal is to give believers clarity around the most confusing topic in the Bible, money, and tithing. A.B. Ridgeway helps tithing Christians become cheerful givers but unlocking their money-making potential, so they can prosper and be the great stewards of the wealth God has entrusted them with.
*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.
