RID focuses on what truly matters in retirement: the income you can actually spend, not simply the income you receive.
When preparing for retirement, most people focus on one number: how much annual income their savings will generate. Financial advisors illustrate withdrawal rates, investment firms project portfolio income, and insurance companies present guaranteed annual payouts. Yet one of the most important questions is often overlooked: How much of that income will you actually be able to spend?
Gross retirement income tells only part of the story. Taxes reduce it, investment fees reduce it, and inflation quietly erodes its purchasing power every year. As a result, two retirees receiving exactly the same annual income may experience very different standards of living. This raises an important question: should retirement planning measure gross income, or should it measure the purchasing power that income actually provides?
This idea forms the basis of Real Income Delivered (RID), a concept developed by RESO Your Finances to shift the focus from projected income to real purchasing power.
Looking Beyond Gross Income
Consider two retirees who each receive $100,000 annually in retirement income. On paper, their situations appear identical. However, after federal and state taxes, investment fees, Medicare premiums, and other costs, their financial realities begin to diverge. One retiree ultimately has approximately $80,000 available for spending, while the other retains only $70,000.
Although both individuals receive the same gross income, they do not enjoy the same lifestyle. The difference illustrates why retirement success is determined not simply by the income generated, but by the income that remains available for everyday living.
RID is designed to measure precisely that outcome. Rather than focusing on how much income a strategy distributes, it evaluates how much purchasing power that strategy actually delivers.
Conceptually, the calculation is straightforward:
RID = Gross Retirement Income − Taxes − Fees − Other Costs
In other words, RID answers a practical question that matters to every retiree:
“How much money do I truly have available to live on?”
Why Inflation Changes Everything
Even if taxes and fees remain stable, inflation introduces another challenge. Many retirement plans assume that receiving the same dollar amount every year is sufficient. In reality, maintaining the same lifestyle requires increasing income over time.
Suppose a retiree begins retirement with a RID of $80,000. That purchasing power supports his or her desired standard of living today. If inflation averages 2.5% per year, however, the gross income required to preserve that same purchasing power rises steadily.
A retiree who initially requires approximately $100,000 of gross income to achieve an $80,000 RID would need roughly $128,000 after ten years, $164,000 after twenty years, and approximately $210,000 after thirty years to maintain the same standard of living. The purchasing power remains constant, but the gross income required to produce it continues to grow.
This illustrates a fundamental shift in retirement planning. The objective should not simply be generating income—it should be preserving purchasing power throughout retirement.
A Different Way to Design Retirement Income
Traditional retirement planning often begins by asking, “How much annual income do you need?” A RID-based approach starts with a different question: “How much purchasing power do you want to maintain throughout retirement?”
Once that objective has been established, retirement income can be structured accordingly. Social Security, pensions, annuities, Roth strategies, taxable investments, and growth-oriented assets can each contribute to maintaining that target purchasing power over time. Rather than relying on a single product or withdrawal rule, the emphasis shifts toward coordinating multiple income sources to support a consistent lifestyle despite changing tax rules, inflation, and market conditions.
RID and TEVD: Measuring Retirement More Completely
While RID (Real Income Delivered) measures the purchasing power available each year, TEVD (Total Economic Value Delivered) evaluates the overall value created by a retirement strategy over an entire retirement.
The formula is straightforward:
TEVD = Total RID + Remaining Assets − Beginning Assets
In other words, TEVD measures the economic value generated beyond the retiree’s original capital. It recognizes that retirement wealth has two purposes: providing income throughout retirement and preserving assets for the future.
Consider a retiree who begins with $1,000,000. Over a 30-year retirement, the strategy delivers $2,400,000 of Real Income Delivered (RID) and leaves $500,000 remaining at age 95.
TEVD = $2,400,000 + $500,000 − $1,000,000 = $1,900,000
Traditional retirement analysis often focuses only on the remaining $500,000 portfolio. TEVD provides a broader perspective by recognizing both the purchasing power enjoyed during retirement and the wealth that remains at the end of the plan.
Together, RID and TEVD form a complementary framework. RID measures the annual purchasing power retirees actually enjoy, while TEVD measures the total economic value their retirement strategy creates over a lifetime.
The RESO Perspective
At RESO Your Finances, we believe retirement planning should begin with the outcome clients ultimately care about—not portfolio balances, withdrawal percentages, or projected rates of return, but the purchasing power available to support the life they want to live.
That is why our planning process incorporates both RID and TEVD. Together, these measurements help evaluate not only how much income a strategy produces, but how effectively it preserves purchasing power while delivering long-term financial value.
In today’s retirement environment, success is no longer measured simply by how much money is accumulated or distributed. It is measured by how much of that wealth is transformed into lasting financial security and quality of life.
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