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. |
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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.
- Use our to see where you stand now and what to do next.
- Get quick tips from others transitioning to retirement:
See all questions |
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| Downsized to independence |
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With an eye on retirement, Marc looked closely at his family's expenses.
Read more. |
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| Retirement Calculator |
| See where you stand today—and what to do next. |
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