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Schwab Real Life Retiremenent Center
How are my expenses likely to change?

While one school of thought says you'll need 75% to 80% of your current income once you retire, we suggest you take a closer look.
This next chapter in your life can be an exciting time, but now more than ever it's important to have a realistic picture of your expenses. Can you count on spending less than you do now? While some expenses will go down, others will go up. For example, in a recent poll, almost half of retirees said that health care costs were higher than expected.1

How your expenses may change

What may decrease: Commuting, weekday lunches, business gifts, retirement savings, business extras, clothing
What may increase: Medicare and Medigap premiums, medical care deductibles, long-term care, travel, leisure and hobby activities, volunteering, gifts and entertainment

What's your number?

In a recent poll, a majority of retirees said that they were spending at least 70% of what they spent before retirement, and many said they were spending 100%.1 For your own rule of thumb, consider how you plan to live.

Percentage of current income minus retirement savings

100%–120% You plan to live it up—you have lots of travel plans and a wish list of expensive toys.
80%–100% You're maintaining—you like your life now and just want more time to enjoy it.
60%–80% You're downsizing—maybe you're finally debt-free or moving somewhere less expensive.

An example of the 80% rule of thumb

Your current pre-tax income $100,000
Less what you currently save ($20,000)
Income minus savings $80,000
x .80
Estimated annual retirement expenses $64,000


Retiring soon?

If you'll be retiring within a year, it's time to get even more specific about costs by preparing a line-item budget that estimates all expenses and income sources. We recommend that you list expenses in two categories: essential and discretionary. Doing so will help you manage and monitor your expenses, and make adjustments more easily.

Next steps

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Downsized to independence
Photo: Schwab Client Marc With an eye on retirement, Marc looked closely at his family's expenses.
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1. The 2008 Retirement Confidence Survey®, Employee Benefit Research Institute®

Source: "Retirement Spending: The 4% Solution," by Rande Spiegelman, August 29, 2006.

Important Information

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation. Data contained here is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Examples provided, including statistical simulations, are provided for illustrative purposes only and are not intended to imply future results you should expect to see. Past performance is no guarantee of future results.