Retirement planning can be a complex puzzle, but tracking the right financial metrics can make all the difference. In this article, seasoned retirees share their most valuable insights on which numbers truly matter for a secure and comfortable retirement. From withdrawal rates to guaranteed income strategies, discover the key financial indicators that can help shape your retirement success.
- Monitor Your Withdrawal Rate
- Secure Guaranteed Lifetime Monthly Income
- Maximize Return on Assets in Retirement
- Maintain a Healthy Cash Flow Coverage Ratio
- Calculate Your Safe Withdrawal Rate
- Focus on Net Retirement Income
Monitor Your Withdrawal Rate
If I were to choose only one financial metric during retirement, it would have to be the withdrawal rate, which is the percentage of your retirement savings you’re withdrawing annually to meet expenses. This particular metric is the very essence of sustainability within a retirement portfolio: it measures a retirement portfolio’s sustainability over time.
The idea behind a safe withdrawal rate, normally set around 4% in most literature, is to ensure that your savings will last throughout your entire retirement so as not to run down too quickly. From then onward, by keeping an eye on the withdrawal rate, you will have a pretty good idea about how well your retirement plan is working for you relative to your spending. Whenever your withdrawal rate starts to approach an unsustainable level—please think market crash, inflation triggering higher expenses, or sudden, unexpected bills—it’s high time to reconsider your spending or change your investment strategy, or maybe even both, and perhaps secure some secondary income.
In simple terms, your withdrawal rate will be like a barometer showing how long your nest egg is going to last given your current lifestyle and market conditions.
Loretta Kilday
Debtcc Spokesperson, Debt Consolidation Care
Secure Guaranteed Lifetime Monthly Income
Guaranteed lifetime monthly income (Social Security, pension, annuity, etc.). Most clients are used to earning a monthly income for their entire life, creating a budget and lifestyle around this number, but then suddenly it stops at retirement. Creating a systematic income in retirement can make for a seamless transition they are used to, as opposed to trying to understand how to convert a $1mil portfolio or whatever asset it may be into an indefinite monthly income.
Bryan Kuderna
Cfp, Kuderna Financial Team
Maximize Return on Assets in Retirement
I would choose Return on Assets (ROA) as the key metric in retirement. While it’s more commonly used in business settings, applying it to personal finances helps measure how efficiently your assets are generating income.
Why is it useful? Because it’s not just about accumulating wealth; it’s about making that wealth work for you. In retirement, every investment should be aligned with a clear goal: generating sustainable income while minimizing risk.
Tip: Regularly assess whether your assets (real estate, investments, accounts) are delivering the expected returns. Good profitability without compromising liquidity is the ideal balance for a financially healthy retirement.
Ambrosio Arizu
Co-Founder & Managing Partner, Argoz Consultants
Maintain a Healthy Cash Flow Coverage Ratio
Cash flow coverage ratio is one metric that I would focus on in my retirement to make sure I’m always financially afloat. It basically tells how much of your retirement expenses are covered by reliable, repetitive income streams. In retirement, you no longer care about how big the number is. What you care about is whether this number is enough for you every single month or not.
By forcing you to focus on sustainability instead of volatility, this metric allows you to understand your financial health easily. Are your living expenses comfortably covered by predictable income from investments, annuities, or passive assets like income funds? If you are heavily dependent on assets you’ll need to liquidate during market dips, that’s a red flag.
To put it simply, retirement is not a net worth competition. It’s a game of cash flow. The more stable and predictable your income is, the less you will worry when the market throws a curveball.
Lon Welsh
Founder, Ironton Capital
Calculate Your Safe Withdrawal Rate
When considering a comfortable retirement, nothing is more important than the financial metrics surrounding the word “withdrawal.” Specifically, the safe withdrawal rate from your retirement savings. This calculation is broadly defined as the percentage of your retirement portfolio you can safely withdraw each year without running out of money. The usual recommendation from most experts is around 4%, since that allows for a steady stream of income while ensuring your nest egg will last. For example, if you’ve saved $1 million, a 4% withdrawal rate would allow you to withdraw $40,000 a year.
The reason the withdrawal rate is so crucial is because it’s a straightforward gauge of your financial health. If you are depleting savings excessively, you could outlive your retirement fund years before you reach your biological life expectancy, particularly if unexpected health care needs or market downturns occur. If, on the other hand, your withdrawal rate is too conservative, you might be living more frugally than you need to and could have accumulated net worth that you would have been better off spending during your life.
I’ve witnessed both halves of this equation in my own experience working with clients. For instance, one client had healthy retirement savings and a desire to spend on travel and experiences, but he was unnecessarily frugal when it came to his withdrawals. At no point were they at risk of running out of money; they spent far less than they could and should have. Yet another case was a client who withdrew more than the 4% stake in his early retirement years, on account of a minor early health issue. When the market suffered a dive, he found himself in a bit of a pickle as his portfolio didn’t recover in a timely fashion as he would have liked.
Dennis Shirshikov
Head of Growth and Engineering, Growthlimit(dot)com
Focus on Net Retirement Income
If I had to pick a metric to focus on in my retirement, it would be net retirement income. While gross income looks impressive on paper, it doesn’t matter in reality. What matters is the amount you are left with once Uncle Sam and medical expenses have taken their cut out of your pocket.
It’s easy to underestimate the impacts of rising medical costs and changing tax brackets, especially when the withdrawals kick in. This metric helps to keep retirees grounded. When you focus on your net retirement income, you are forced to identify overlooked expenses that have the power to erode your financial security over time.
The goal is not just to maintain a lifestyle; it is to do so with sustainability and peace of mind. When you know you have your expenses covered after all the deductions, you sleep better at night. And that’s the measure of financial health in retirement.
Harold Wenger Jr.
Partner, Wealth Manager, Kingsview Partner
