The Most Useful Retirement Number: Your Income Gap

By Greg Stevens · 3 min read

Most people measure retirement readiness by their account balance. The more useful number is your monthly income gap: how much of your spending isn't covered by income you can count on.

Find it in three steps

1. Add up your monthly spending in retirement: housing, food, insurance, health care, travel, all of it.
2. Subtract your steady income: Social Security, any pension, rental income, anything that arrives every month regardless of the market.
3. What's left is your gap. That's what your savings have to cover, every month, for as long as you live.

For example, if you'll spend $6,000 a month and Social Security brings in $4,200, your gap is $1,800 a month.

Why it makes decisions easier

• It tells you how hard your savings have to work, and how exposed you are to a bad market early in retirement.
• It shows whether delaying Social Security, which raises your steady income, would close much of the gap.
• It helps you decide whether turning part of your savings into guaranteed income makes sense, and how much.

I built a free income gap calculator that does the math for you in about two minutes.