The hottest debate in the Seely household right now is not what to have for dinner or where to go on holiday. It is which number matters more when planning for retirement: the net worth you need to build or the income your current assets need to generate to cover your annual retirement spending.

Needless to say, we hold two very different opinions. I do not think either approach is wrong, but I suspect the answer depends on how you look at the problem and what you are really trying to achieve.

The case for the net worth number

A net worth goal is simple and satisfying. You add up what you own, subtract what you owe and measure your progress against a target. It rewards the behaviours that matter most during the accumulation years: saving consistently, paying down debt, investing sensibly and letting compound growth do its work.

It is also easy to track. With annual, or as we do semi-annual updates to your net worth, you can see whether you are moving in the right direction.

From my perspective, if you reach your net worth goal and that wealth is properly diversified, drawing an income from it in retirement should be fairly straightforward. A balanced mix of shares, bonds, property and cash gives you several levers to pull.

In a strong year for markets, you might draw from your investments. In a weak year, you might lean on cash reserves or rental income and give your portfolio time to recover. Diversification is what turns a large number on a statement into a flexible, resilient source of funds.

The case for the income number

On the other hand, the income-generating number is equally compelling. Net worth is a snapshot, but retirement is lived month by month. You cannot pay a utility bill with a percentage gain on paper, and a large net worth can be deceptively illiquid.

A substantial sum tied up in the family home, a plot of land or a rental property may look impressive on a balance sheet while producing very little spendable cash.

Focusing on the income-generating number forces you to ask harder and more practical questions. What will your lifestyle actually cost? How much of that will be covered by pensions, rental income or dividends?

How much must come from selling assets, and how sustainable is that over 30 years or more? Someone who starts with the income they need and works backwards is far less likely to reach retirement with a handsome net worth and an uncomfortable cash shortfall.

Furthermore, income is what protects you from being a forced seller. If your regular outgoings are covered by reliable sources, you are not obliged to sell investments during a market downturn, which is when poor timing can do lasting damage to a retirement plan.

Where the two numbers meet

The reality is that the more you think about it, the more you realise these are not rival goals but two sides of the same equation. Your income requirement determines your net worth target.

If you need a certain amount each year and expect to draw down a sensible percentage of your portfolio, the maths tells you how large that portfolio must be.

A commonly quoted rule of thumb suggests withdrawing around 4 per cent a year, which implies needing roughly 25 times your annual spending. It is only a guide, and it deserves scrutiny, because inflation, tax obligations, which depend on where you reside, investment returns and longevity all affect how well it holds up.

But it illustrates the point: the income number and the net worth number are linked by a simple calculation.

Let’s face it, the income number tells you what you are aiming for, and the net worth number tells you how far you have to go. Without the first, the second is just a figure without context. Without the second, the first is merely a wish.

Why timing matters as much as the totals

There is one more reason to take the income number seriously, and it tends to catch new retirees by surprise.

Two people can retire with identical net worth and identical average investment returns, yet end up in very different positions depending on when the good and bad years arrive.

A sharp fall in the first few years of retirement, while you are also drawing money out, can permanently shrink your portfolio, because you are selling assets at depressed prices to fund everyday living.

What does help is a clear income plan: perhaps a cash reserve covering a year or two of spending, alongside dependable sources such as pensions or rent.

Inflation adds to the challenge, since the income you need at 70 will be considerably higher in nominal terms than the income you need at 60. This is why the two numbers must be reviewed together, and regularly, rather than set once and forgotten.

So, which comes first?

This raises a bigger question: is it a little like the chicken-and-egg dilemma? Do you build the wealth and then work out the income, or define the income and then build the wealth to match?

In practice, the sensible answer is to do both, in a particular order. Start with the income number, because it anchors your plan in reality and shows you what a comfortable retirement actually costs.

Then convert it into a net worth target and make that your day-to-day focus, because a single clear goal is easier to pursue than a complicated set of moving parts.

As retirement approaches, return to the income number and test it. Will your assets, in the form they are held, really deliver the cash you need, when you need it?

Where our household differs is in emphasis rather than principle. My perspective has focused on building a diversified pot of wealth to provide income when the time comes, while my husband wants proof, in the form of a dependable income stream, long before the last paycheque arrives.

Having thought it through, I suspect we are both right and that the real risk lies in ignoring either number altogether.

With that in mind, anyone planning for retirement should calculate both figures: work out what they need to live on each year and what they would need to own to support it.

• Carla Seely is the chief operating officer at Freisenbruch Insurance Services Ltd and has 26 years of experience in international financial services, wealth management and insurance. She holds multiple professional qualifications, including ACSI (UK), QAFP (FP Canada) and AINS (The Institutes), along with several investment licences from the Canadian Securities Institute. She also earned a master's degree in Business and Management from the University of Essex.

• For further inquiries or suggested topics, e-mail justaskcarla@outlook.com