When you’re planning for retirement income, diversification is important though it doesn’t guarantee you’ll have all you need. One moderately conservative mix when you retire is 40% of total assets in equities, 50% in fixed income, and 10% in cash. But what’s right for you depends on your age, the amount and variety of your accumulated assets, and your risk tolerance. The amount of income your investments will provide after you retire depends on how much you’ve put away over the years and the kind of return your investments pay. Let’s look at a hypothetical example. Bob and Mary have an income of $100,000 a year before they retire. Since they estimate that they’ll need 80% of their current income
to maintain a similar standard of living, they’ll need income of roughly $80,000 from various sources. Assume they’ll receive $25,000 a year from
Social Security and another $35,000 from an employer-sponsored plan. That means even in the first year of retirement, before inflation is a real factor, they’ll have $20,000 less than they need. Depending on the investments they’ve made, they’ll either have access to enough income to meet their living expenses and have something left for pleasure, or they’ll have
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