Simple Guide: How Much Cash Flow Do You Need for Retirement?

Written by mwealthgroup
Published on March 25, 2024

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Have you ever heard someone say they want to save a million dollars for retirement? 

While this might be a common goal, but it’s not the best way to plan for retirement. 

In this quick guide, you’ll discover how focusing on cash flow, the money you have coming in every month rather than a lump sum, is the key to planning for retirement. 

A cash flow focus during retirement planning ensures you enjoy your desired lifestyle without worrying about the future.

Why Saving a Big Lump Sum Isn't Enough

1 million dollars for retirement

Imagine you've saved a million dollars by the time you retire. Sounds great, right? 

But if you retire at 65 and live until 95, that million has to last you 30 years. That works out to about $2,700 a month. 

Living on $2,700 a month is impossible for most people, especially for a couple.

Plus, there are other factors at play, including –

  1. Inflation: The value of money decreases over time, meaning $1 million today won't stretch as far in 30 years, effectively reducing your budget annually.
  2. Longevity: People live longer now, increasing the risk of outliving your savings, especially if you need them to last 30 years or more.
  3. Unexpected Expenses: Retirement can bring unforeseen costs, particularly medical bills, which can deplete savings quickly without proper planning.

What's the Deal with Cash Flow?

Instead of staring at that big savings number, think about how much money you need every month to live how you want when you retire. This amount is your cash flow. 

Cash flow isn't just about covering basic needs like utilities and food; it's about ensuring you have enough income to enjoy the hobbies, travel, and leisure activities you've always wanted and deserve. 

Cash flow is the foundation of a retirement plan that adapts to your life's desires, not just demands.

Figuring Out How Much Money You Need

calculating how much cash flow do I need to retire

So, how much cash flow do I need to retire? Start by looking at what you spend now. Check your bills, credit card statements, and any other spending. This will help you determine how much you need each month, every three months, and yearly. 

It's all about understanding what you'll need to keep up your lifestyle when you're not working.

Understanding your retirement cash flow needs involves looking at your current spending habits. 

Here’s how to break it down –

  1. Monthly Expenses: Gather your bills, credit card statements, and any other regular expenses. This includes everything from groceries and utilities to subscriptions and entertainment. Don't forget to factor in occasional splurges or vacations; they’re part of life, too.
  2. Annual Expenses: Some costs don’t occur monthly but still need planning, like property taxes, insurance premiums, or holiday gifts. Estimate these annual expenses and divide by 12 to add to your monthly total.
  3. Future Health Care Costs: Estimating future medical expenses can be tricky, but it’s essential. Consider Medicare or health insurance premiums, out-of-pocket costs, and potential long-term care needs.
  4. Dreams and Goals: Retirement is your time to shine. Whether it’s traveling, hobbies, or moving to a dream location, factor these costs into your calculations.
  5. Reserves: Unexpected expenses don’t retire when you do. Having reserves or an emergency fund for unforeseen costs is essential.


Forget about hitting a specific savings number. Focus on how much money you'll need to come in regularly to enjoy your retirement. 

Financial freedom means having enough money coming in without working that covers all your expenses—and making sure it doesn't run out. 

Start planning now by looking at your current spending and think about what you'll need in the future. This approach will help you create a retirement plan that really works for you, ensuring you can live comfortably and worry-free in your later years.

Need help figuring out your cash flow number? Reach out the the team at M Wealth Group. We’re here to make retirement planning straightforward for you. 

Click HERE to get in touch and ask all your burning retirement planning questions.

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M Wealth Group
M Wealth Group
Together, Martin and Chelsea use their professional expertise and life experiences to provide personalized financial strategies to help clients achieve their goals.
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