How Much Do You Need?

Next, consider how much you need in cash flow—now or in the future. Do you even know?

This book isn’t about budgeting, and there are plenty of personal finance books that can help you there, as well as common software like Quicken. Some people do a monthly budget; others do an annual one. I have no view on which is better—it’s your personal preference, and you should do whatever makes the most sense to you. If it makes sense to you, you’ll be more likely to do it and stick with it.

Then, too, if you’re already in retirement, you’ll have a better idea of what your expenses are and will be. If you’re a ways out, you’ll need to make some projections. Which is fine—just be sure to be thorough and reasonable. If you’re not confident it’s right, go back until you are. No book can do this for you—this requires homework by you and is totally personal to you and your household. But it’s critical. If you don’t know what your expenses are or will be, you can’t know if the cash flow your portfolio kicks off is or will be sufficient. And there’s no way to know what an appropriate benchmark is.

There are “rules of thumb” about how to project retirement income needs. I’m never a fan of rules of thumb, so be cynical about any projecting cash flow needs (and, heck, anything at all). Some suggest you should take your current income needs and assume you’ll need 70% to 80% in retirement. The idea being in retirement, you aren’t caring for kids, buying pricey work clothes, etc. ...

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