When discussing the future and retirement, one of the most frequently asked questions is:

“How much money do I need to have a stable monthly supplement?”

It is a legitimate question, but also a more complex one than it appears. Because between “needing” and “having available” there is an intermediate step that is often misunderstood: that of pension projections.

In particular, it can happen that a figure is presented which is supposed to represent the savings target required to obtain a certain monthly income in later life. But where does that figure come from? And above all: is it real, is it guaranteed, is it already owned?

The Theoretical Value Required to Generate an Income: A Concept to Handle with Care

In the pension and insurance sphere, calculation tools are used to estimate how many resources would be needed today to guarantee a specific periodic payment in the future. These are actuarial models — constructions based on life expectancy projections, interest rates, and payment durations.

This figure — which we might call the theoretical coverage value — does not represent available capital, but rather an estimate required to plan a supplement to one’s pension.

Example: How Much Is Needed to Secure €900 per Month from Age 67

Consider the case of Paolo, aged 67, who wishes to receive €900 per month, starting immediately, for the rest of his life or, at most, until he reaches 90 years of age.

This is a lifelong annuity: it will be paid each month only if Paolo is still alive. The plan therefore provides for up to 276 monthly payments (23 years × 12 months), though not all of them will necessarily be made, as the duration will depend on his actual longevity.

If we were simply to multiply €900 by 276 payments, we would obtain €248,400. However, this figure is purely theoretical: it takes no account of the fact that future payments must be discounted (that is, adjusted for the time value of money) and weighted by the probability that Paolo will be alive each month.

Using the ISTAT 2024 male survival tables and a technical annual rate of 1%, the actuarial calculation returns a very different result: approximately €166,700.

This is the figure that, under the assumptions used, would be required today to provide Paolo with the desired income.

A Word of Caution: This Is Neither a Patrimony Nor a Guarantee

That figure does not correspond to a bank account balance or a sum already set aside. It is the result of a projection intended for planning purposes, not for creating false comfort.

Confusing a theoretical estimate with actual capital can lead to two opposing errors:

  • Overestimating what one has, by believing oneself to be already financially secure.
  • Being discouraged by an apparently unattainable objective, when in fact it can be built up step by step.

How to Use These Figures Productively

In a retirement planning process, estimating the capital required to generate a given income is useful. But it is only useful if the assumptions underlying the calculation are made explicit:

  • At what age does the income commence?
  • What is the maximum duration?
  • What type of annuity is it (life annuity, certain-term annuity, reversionary annuity)?
  • What discount rate has been applied?
  • Are costs, taxation, and revaluation adjustments included?

These variables can significantly alter the required amount. This is precisely why it is essential to accompany any figure with a clear yet rigorous explanation.

From Calculation to Reality: The Role of Tangible Savings

Knowing “how much would be needed” is only the first step. What truly matters is building real capital over time capable of approaching that objective — through pension vehicles, coherent investments, and gradual yet consistent choices.

The theoretical income estimate serves as a compass. But it is the actual capital — present or future — that determines whether one will truly be able to live with peace of mind in later life.