These days, many investors who are approaching retirement worry that their retirement investing won’t generate enough income once they’ve stopped working.

We recommend that you base your retirement planning on a sound financial plan. Here are the 4 key variables that your plan should address to ensure that your retirement investing generates enough income in retirement:

1. How much you expect to save prior to retirement;
2. The return you expect on your savings;
3. How much of that return you’ll have left after taxes;
4. How much retirement income you’ll need once you’ve left the workforce.

Most accountants or tax preparers can do the math for you, based on numbers you provide. Coming up with realistic numbers is the hard part. It depends on your personal preferences.

Invest in your Financial Future for FREE Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor. Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.  I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

For instance, a financial planner can give you some idea of what others are saving. But you should base your savings on the way you want to live, rather than on the averages.

Your plan also needs to be based on a realistic view of how much income you’ll need once you’ve stopped working. A key mistake is to underestimate how much it costs to fill up your new-found free time.

As for the tax structure, it keeps changing. But it’s safe to assume that you’ll pay a lower rate of tax on dividends and capital gains than on interest, and that you’ll generally pay taxes on capital gains only when you sell.

Retirement investing: Stick with conservative estimates to account for unforeseen setbacks

As for the return you expect from your retirement investing, it’s best to aim low. If you invest in bonds, assume you will earn the current yield; don’t assume you can make money trading in bonds.

Over long periods, the total return on a well-diversified portfolio of high-quality stocks runs to as much as 10%, or around 7.5% after inflation. Aim lower in your retirement planning — 6.5% a year, say — to allow for unforeseeable problems and setbacks.

Above all, it’s important to remember that while finances are important, the happiest retirees are those who stay busy. You can do that with travel, golf or sailing. But volunteering, or working part-time at something you enjoy, can work just as well.

Get all the information you need to make smart retirement investing choices

If you’re looking for authoritative advice on investment issues—including retirement investing—or fundamental analysis on investments you’re considering buying (or selling), you should join Pat McKeough’s Inner Circle. It’s Canada’s most exclusive investment group.

Inner Circle members always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. We guarantee it.

You’ll not only get the answers to your questions, but you’ll also get to see all other members’ questions, and our answers (of course, we eliminate any personal information).

Even if you don’t ask questions yourself, you’ll be surprised at what you can pick up by reading answers to questions posed by other investors just like you.

And that’s not all. You also get subscriptions to all 4 of my newsletters, The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor.

Don’t wait! Give yourself an advantage over other investors by joining my Inner Circle today. Click here to learn more.