Your target investment income simply refers to how much income you reasonably expect your investment portfolio to provide annually.  This target or objective should be  expressed as both an absolute dollar amount and as a percentage return on investment.  When integrated with your spending plan it provides the means to predict whether your current spending and investment plans provide sufficient income to last your lifetime, and to leave an inheritance if desired.

Developing a spending plan and an investment plan is, by its nature, an iterative process.  As discussed in the section Develop a Spending Plan it is probably easiest to begin with an estimate of current expenses since they are usually grounded in the tangible activities of your existing standard of living.  This total annual spending plan is then compared with that recurring and reasonably assured income available from pensions, social security and annuities.  The "spending gap" or shortfall then becomes a target income objective for the return from your investment portfolio.  The achievability of this target investment income is based on several factors:  the size of your portfolio, asset allocation, your risk tolerance and your life expectancy.

It may be, after determining your spending plan and resulting target income, that there is no reasonable possibility of achieving that target (and your desired spending level) at any acceptable degree of risk.  In this case, you probably have no alternative but to decrease your spending plan or seek other sources of income.

Complicating the analysis are many contingent factors which are difficult to predict.  These include life expectancy, future healthcare needs,  the risk of needing long-term care, and the desire to leave an inheritance. 

A logical place to begin is to determine your time horizon for investing and spending.