By Joni Lindquist

A common goal of working people often is to retire from their primary career at a targeted age.  Much is written about the amount of savings needed to support your lifestyle in retirement.  However, I caution you to beware of such “rules of thumb” like you can withdraw 4% of your portfolio each year.  This only applies to how much you can withdraw to make your nest egg last for 30+ years.  It doesn’t tell you how much you can spend.  Plus, what we have found in working with clients, is that everyone is different and each retirement situation is unique.

When building a financial plan with a key goal of retirement, estimating how much you will spend in retirement is important.  Once again, be cautious of average or estimates, such as “you will spend 85% of your pre-retirement expenses.”  Often, we find that people spend similar amounts in retirement, they just spend in different ways.

Also, people are living longer, so your retirement may last upwards of 30 years.  As you near retirement (3-5 years out), it is important to get a grasp of your likely expenditures.  It may be a good idea to start your estimate with expenses when you are in your 40s.  These expenses can be included in your financial plan to make it as accurate as possible.  This will provide information to help you determine when you can retire.  Consider the following 5 questions:

  1. What will you truly eliminate or reduce in your spending? Look at work-related personal expenses, like commuting, parking, and clothing costs.  However, now with time on your hands, you may drive around town even more (see Question  #5).  You also may spend comparable amounts on clothing, perhaps more casual, as opposed to professional clothes.  And if you are an empty-nester, think about the costs beyond education savings that will go away, such as food and clothing.

The remaining questions deal with estimates of what you will spend:

  1. Health care – We all know that advancements in health care keep us alive longer; yet they can come at a high costs. Because of this, we include health care as a separate variable in a client’s retirement plan because health care has been inflating at a higher rate.
  1. Family support – who will you be supporting?  For how long and what are the expenses?  We have seen people drain their portfolios by supporting adult children and/or grandchildren.   If you are married, make sure you and your spouse agree on what level of support you’ll provide.  One of the worst things you can do is spend down your nest egg, making yourself a financial burden for your children later.  Others may have to provide financial support for their parents’ last years.
  1. Where will you live? For your first phase of retirement, two questions arise.  Where will you live (geographically)?  Be aware of the cost of living in other areas which may lead you to spend much more, even though your lifestyle hasn’t changed.  Second, what form of housing will you choose?  Don’t presume that by downsizing your home your housing costs will be less.  This can be a fallacy, because to get the amenities and quality you want, a smaller condo or home may cost just as much.
  1. How will you spend your time? We believe this is a critical question, not only for your financial plan, but also for your emotional well-being. What will you do with your time and talents in retirement?   Sadly, we tend to spend more time planning a two-week vacation than planning what we will do in retirement to keep busy and happy.  What will make you happy?  I suggest activities that fit in each of these categories:  1) fun   2) engaging and 3) have meaning, i.e. to think beyond yourself.    Spend time prior to retirement reflecting on what you want to do.  Hobbies can be expensive, requiring equipment and materials.  Many folks want to travel more now that they have the time and are free of commitments.  There are a lot of travel options.  We have clients who buy an RV and travel the U.S. Others want to spend a month living in a foreign country.   Others want to travel through much of the world.  All of these choices require different levels of spending.  Ask yourself if you want to do more in the way of experiences –cultural, sporting events, museums, art, gardening, etc.

While the above isn’t an exhaustive list, we believe it may help get you started envisioning your future in retirement and estimating the costs.   It’s not simple or easy.  However, it can be fun to start talking and thinking about your future.  Then work with your financial planner to estimate what that lifestyle may cost you.

For help with your specific retirement readiness needs, schedule a meeting by clicking below, contact Joni Lindquist –, or call (913) 345-1881.

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