{"id":794,"date":"2019-01-25T10:29:02","date_gmt":"2019-01-25T10:29:02","guid":{"rendered":"https:\/\/evolvemyretirement.com\/blog\/?p=794"},"modified":"2019-02-07T17:43:17","modified_gmt":"2019-02-07T17:43:17","slug":"retirement-income-wrong-focus","status":"publish","type":"post","link":"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/","title":{"rendered":"Retirement Income Is The Wrong Focus"},"content":{"rendered":"\n<p>How much retirement income do you need? It\u2019s a question you can  read in plenty of blogs about retirement planning. On the face of it, it sounds like a sensible question. You probably know how much income you\u2019re making before retirement. Maybe you have a fair idea about how much you\u2019re spending before retirement. You may also have aspirations about what you want to spend after retirement. From that you can easily work out the future income you\u2019ll need, right? Wrong!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The fallacy of income replacement<\/h2>\n\n\n\n<p>Some time ago, I wrote an article about the so-called <a rel=\"noreferrer noopener\" aria-label=\"80% rule (opens in a new tab)\" href=\"https:\/\/evolvemyretirement.com\/blog\/80-percent-rule\/\" target=\"_blank\">80% rule<\/a>. This described the rule of thumb whereby you need to plan on replacing 80% of your pre-retirement income. Whether it\u2019s 80% or 75% or any other figure doesn\u2019t matter. The fallacy is that you should first determine your required post-retirement income, and then figure out how to generate it.<\/p>\n\n\n\n<p>What\u2019s wrong with this? The simple answer is that the income you pick may be the wrong one. If it\u2019s too high it will force you to take too much risk. If it\u2019s too low you\u2019ll miss out on spending you could have afforded.<\/p>\n\n\n\n<p>Okay, you say, then make sure you pick just the right level of retirement income. Well, a fixed percentage of your pre-retirement income doesn\u2019t work, as I previously explained. Is there a more complicated formula that will work? Possibly, but this shows that we\u2019re starting from the wrong place.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Retirement spending not retirement income<\/h2>\n\n\n\n<p>Focusing primarily on retirement income is simply wrong. The primary focus should be on spending. It\u2019s only after you\u2019ve worked out your likely spending patterns both before and after retirement that you should start thinking about income replacement.<\/p>\n\n\n\n<p>There are two types of spending:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Essential spending, about which you can\u2019t (or maybe won\u2019t) be flexible.<\/li><li>Discretionary spending, on luxuries that you could flex up or down if necessary.<\/li><\/ul>\n\n\n\n<p>Once you\u2019ve identified all of your essential spending, in theory it should be possible to pick a sustainable level of discretionary spending. This would also depend upon things including your existing assets and debts, you\u2019re current income, and your planned retirement date.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">An impossible calculation?<\/h2>\n\n\n\n<p>I say \u2018in theory\u2019 because this calculation is really hard. It\u2019s hard because there are so many variables. It\u2019s even harder because there are so many uncertainties; these include how long you (and your partner if you have one) will live, future inflation, and future investment returns.<\/p>\n\n\n\n<p>Unlike the 80% rule the calculation needs to be tailored to your particular circumstances, and be based on explicit assumptions. Financial advisors would love to have a tool that could do this. Fortunately such a tool is at hand. What\u2019s more, you don\u2019t need to be a finance professional to use it. And you can start using it for free. It\u2019s the <a rel=\"noreferrer noopener\" aria-label=\"EvolveMyRetirement (opens in a new tab)\" href=\"https:\/\/evolvemyretirement.com\/\" target=\"_blank\">EvolveMyRetirement<\/a>\u00ae Intelligent Financial Planning Calculator.<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>How much retirement income do you need? It\u2019s a question you can read in plenty of blogs about retirement planning. On the face of it, it sounds like a sensible question. You probably know how much income you\u2019re making before<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":1,"featured_media":447,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-794","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Retirement Income Is The Wrong Focus - EvolveMyRetirement<\/title>\n<meta name=\"description\" content=\"Find out why asking how much retirement income you need is wrong, and why EvolveMyRetirement focuses on how much you will spend.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Retirement Income Is The Wrong Focus - EvolveMyRetirement\" \/>\n<meta property=\"og:description\" content=\"Find out why asking how much retirement income you need is wrong, and why EvolveMyRetirement focuses on how much you will spend.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\" \/>\n<meta property=\"og:site_name\" content=\"EvolveMyRetirement\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/evolvemyretirement\" \/>\n<meta property=\"article:published_time\" content=\"2019-01-25T10:29:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-02-07T17:43:17+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/evolvemyretirement.com\/blog\/wp-content\/uploads\/man-311326_1280.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"850\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Nick\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@evolvemyretire\" \/>\n<meta name=\"twitter:site\" content=\"@evolvemyretire\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Nick\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\"},\"author\":{\"name\":\"Nick\",\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/#\/schema\/person\/927febeaea45f5b77b454c800da0e5b8\"},\"headline\":\"Retirement Income Is The Wrong Focus\",\"datePublished\":\"2019-01-25T10:29:02+00:00\",\"dateModified\":\"2019-02-07T17:43:17+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\"},\"wordCount\":496,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/evolvemyretirement.com\/blog\/wp-content\/uploads\/man-311326_1280.png\",\"articleSection\":[\"Uncategorized\"],\"inLanguage\":\"en-GB\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\",\"url\":\"https:\/\/evolvemyretirement.com\/blog\/retirement-income-wrong-focus\/\",\"name\":\"Retirement Income Is The Wrong Focus - 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