# How Much Money To Retire? Figure Guaranteed Income Sources First

## Add up sources of guaranteed income to determine how much to retire

One of the steps you will need to take to determine how much money you will need to retire is to figure out how much retirement income you will have from guaranteed sources.

Guaranteed retirement income includes things like Social Security retirement benefits, pension income, and annuity income. Some people include rental income from investment property in this category, although it is certainly not guaranteed.

If you consider it to be a stable source of income then you could include it here; however you must have a way to account for the times where it may not be rented.

It may be easiest to lay out your guaranteed sources of income in a timeline format with a column for each calendar year, along with your corresponding age that year in the heading. The timeline format works as some income sources may start at different times, such as one pension at 60, a Social Security spousal benefit starting at 66, and your own Social Security starting at age 70.

For example, assume you look at your Social Security statement, and it tells you if you work until age 65, then at 66 you will receive \$1,760 per month.

Calculation: \$1,760 x 12 = \$21,120 per year.

Also assume you have a piece of property that you rent out. After paying all expenses, you receive about \$600 per month. Occasionally your property sits empty in between renters, so to develop a conservative estimate, you assume your property is rented only ten months out of every year.

Calculation: \$600 x 10 = \$6,000 per year.

Using a very simple calculation you now know that your guaranteed sources of income will provide you \$27,120 per year.

Now let's add in a spousal Social Security benefit and a pension.

Using a timeline format you could lay things out as you see in the table below (shown in monthly amounts, with an annual total also).

For this timeline example I assumed a spouse who was a year older and had started claiming a spousal benefit (which would be 50% of the full retirement age benefit of \$1,760 used above). For simplicity purposes I left out the annual increase in Social Security benefits that would come from inflation and assumed the pension had no inflation increase.

Guaranteed Income Timeline
Age 65Age 66Age 67Age 68Age 69
Pension\$543\$543\$543\$543\$543
Spousal SS\$880\$880\$880\$880\$880
Age 66 SS \$1,760\$1,760\$1,760\$1,760
Rental Income\$600\$600\$600\$600\$600
Total (monthly)\$2,023\$3,783\$3,783\$3,783\$3,783
Total (annual)\$24,276\$45,396\$45,396\$45,396\$45,396

Now, you take this income projection and compare it to your estimate of retirement expenses to begin to develop an accurate estimate of how much money you will need to retire.

You can also use this format to create alternate income timelines. For example, what if you delayed the start of a pension? It may be less income now, but substantially more later. You can run this timeline out through life expectancy and total the income over your life to see how different options might work out.

Once you have estimated your retirement expenses, and guaranteed income sources, you move to the next step in the planning process, which is to calculate the gap between the two items.