Many people wonder,
“How much money will I really spend in retirement?”
Still, others want to know more specifically how much money do you need per month in retirement?
Before we get into answering these questions you may also be wondering how to avoid going broke in retirement while securing your nest egg! If so, please check out my FREE RETIREMENT VIDEO NOW! CLICK HERE
There are two main ways for you to arrive at an accurate answer:
- Create a Budget
- Work Backwards from how much you spend
Let us look at both options:
Creating a Budget
Creating a budget is a pretty straightforward process but it can be overwhelming and tedious.
Your goal is to get a very clear picture of EXACTLY what is going OUT every month in bills.
If you need a little help doing this, I put a free resource on my website called, “Where Is All Of My Money Going?” Here is the link…
This FREE download is a memory jogger of all of your potential monthly bills.
Once you fill this out, simply eliminate any expenses that will go away in retirement.
For example: If you know that you will pay off your mortgage by the time you retire then you can subtract that expense.
But be careful of underestimating! Certain bills may go away but others might increase.
As my colleague and well-known Economist, Tom Hegna, likes to say, “When you retire, EVERY day is Saturday!” And isn’t that the day you spend most of your money?
Now while filling out a Budget is a good idea many people just do not have the patience so let us look at a faster way to get to the same information.
Work Backwards From How Much You Spend
This is my preferred method for figuring out how much money you will need each month in Retirement.
It is much less tedious and a whole lot faster.
You start with how much gross pretax income you are bringing in now.
Then you subtract how much you are contributing to retirement plans since you will not be doing that in retirement.
You then subtract how much the Government is taking out in taxes as we are trying to get to a NET after-tax number of what you actually spend each month.
Next, you look at how much money you are saving each month and subtract that.
WARNING: Do not subtract the money you save to spend. If a client tells me, they save $500 per month then they should also be able to show me that they have at least $30,000 in a savings account or investment.
If you are saving money in an account only to spend it on vacation, fixing the house, or property taxes, what makes you think you will not still be doing that in retirement?
Do not subtract Save to spend money from your income need.
Now If you really are a good saver and you do have a good amount of money saved then you SHOULD subtract that as you will not NEED to be doing that in retirement.
Also, subtract any bills that will be going away such as mortgage payments and paying a car off if you do not plan to purchase another car.
Add in anything you are not paying for now that you will possibly need like maybe Medicare Supplement Ins, or a Long-Term Care policy premium, or a bigger Vacation Budget or Saturday spending fund.
The final number should get you a really good estimate of what it costs to run your household each month.
If you need help coming up with this number, ask your financial advisor.
This is something MOST holistic Financial Planners will be in the habit of helping their clients with.
If you get a deer in the headlights look you may want to shop around for a NEW advisor.
Here is a great article for finding the right Financial Advisor for you…
If you want to know how much it should cost to work with a Financial Advisor check out this article right here…
And if you want some questions to ask an advisor you might want to read this…
If you found this information to be helpful be sure to check out my short video on How To Avoid Going Broke In Retirement While Securing Your Nest Egg! CLICK HERE NOW!
Disclosure: Investment Advisory Services offered through Retirement Wealth Advisors, LLC. (RWA) a Registered Investment Advisor. Rockford Retirement Planning, Inc. (RRP,Inc.) and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that RRP,Inc. and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
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