The best thing people can do in order to know how much they can take without running out of money is doing an income gap analysis.

Financial planners, and advisors rarely actually do this kind of analysis. I’ve spoken with hundreds of people who simply say, they’ve never had help doing it.

In order to do an income gap analysis people need to run a realistic projection of what their nest egg will be at retirement.

If you have money in stocks or 401(k)’s, then use a conservative growth rate and continued contributions to come up with a nest egg projection by age 65.

Once you have that nest egg projection at retirement, estimate taking 3-4% of your nest egg per year, if you don’t want to run out.

Once you’ve come up with your 3% number, subtract the percentage of taxes that you’ll pay (if you are taking money out of a tax deferred qualified plan) and that will give you your annual income to spend without running out of money.

For most people this will be a very disappointing number, but at least now you’ll know what you are facing so you can save and prepare more fully.