We’re so used to the idea that we need $1 million or $2 million to retire that we forget about the real issue when it comes to our retirement spending.

There’s something more important than just amassing millions of dollars in an account — and hoping that a stock market crash doesn’t wipe out half its value just before you retire.

More important than the size of your nest egg is your cash flow.

Why Monthly Income Matters
A report released by Standard & Poor’s points out that timing matters when it comes to your nest egg.

If the market has years of negative returns at the beginning of your retirement, you can go through your nest egg rather quickly. That’s because you will withdraw money each year, even as your capital losses add up, leaving you less principal to earn interest on.#-ad_banner-#

The 4% withdrawal rule isn’t going to save you if the market has three years of losses at the outset of your retirement. Indeed, years of losses at the beginning of your retirement have a bigger impact on your nest egg than years of losses later on.

On top of that, you can be psychologically shuttered by the fact that huge amounts of money are more difficult to picture than small amounts of money. To many of us, $2 million seems like a vast sum, and it’s hard to consider how far it would really go.

Instead, consider your monthly income needs. Add your likely monthly expenses in retirement (use your current expenses as a starting point), and create a plan to help you develop income that will last you through retirement. That’s exactly what my colleague Carla Pasternak recommends to her readers in her High-Yield Investing newsletter. Carla shows her readers a way to safely earn $25,000 to $55,000 in extra income every year for the rest of their lives. You can learn more about her philosophy here.

Creating Retirement Income Streams
It’s true that your large nest egg can provide you with monthly income. Indeed, the reason that many try to build a nest egg of $1 million or more is to make sure there is enough money (with the help of returns) to meet monthly income needs.

However, rather than focusing on the big nest egg number, create reliable income each month. This is income that won’t be as affected by stock market drops. Plus, cultivating multiple streams of retirement income keeps you from becoming too dependent on one source of income.

Here are a few ideas for generating income during retirement:

• Dividends and interest: Begin building an income portfolio with the help of dividend-paying investments and interest-paying investments. During the building phase, reinvest your dividends and interest to help grow your portfolio faster. By the time you retire, you can have a tidy income stream from your investments.

• Rental property: Owning rental property can be one way to create an income stream. As you approach retirement (or purchase more properties), you can hire a management company to take care of the hard work. You enjoy the regular stream of income without doing the heavy lifting.

• Business: Start a business. You can grow the business and either sell it (and use the proceeds to purchase a non-sketchy immediate annuity or buy dividend stocks that provide regular income) or retain interest in it. Either way, you have an income stream that isn’t as dependent on stock market cycles.

• Part-time job: You can work part time to generate income. This can include such jobs as consulting, freelance work, or the purchase and management of websites for income.

If you have more than one source of income built up, you will continue generating income during retirement — and you won’t need to draw on your nest egg as much. Find ways to meet your monthly income and create greater financial independence later on.

Action to Take –> While you don’t want to neglect your nest egg, it might actually be more important to focus on finding diverse ways to generate regular monthly income. The more income streams you have, the less likely you are to experience financial devastation when one stream falters.

This article originally appeared on InvestingAnswers.com:
Forget Your Nest Egg — Here’s The Key To A Secure Retirement

P.S. — On the subject of creating income streams for your retirement, my colleague Carla Pasternak goes into detail about what she calls her Retirement Savings Stocks here. Some pay quarterly. Others pay monthly. All offer you a safe, stable, and reliable source of high income even if the market goes down. Learn more here.