{"id":248343,"date":"2025-10-29T17:41:32","date_gmt":"2025-10-29T17:41:32","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/248343\/"},"modified":"2025-10-29T17:41:32","modified_gmt":"2025-10-29T17:41:32","slug":"how-to-figure-out-your-retirement-needs-based-on-what-you-spend-now","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/248343\/","title":{"rendered":"How To Figure Out Your Retirement Needs Based on What You Spend Now"},"content":{"rendered":"\n

Your current spending isn\u2019t just reflective of how you live now; it can be a predictor of how much money you\u2019ll need in retirement<\/a> if you extrapolate into the future.<\/p>\n

Find Out: How Long $2 Million in Retirement Will Last in Every State<\/a><\/p>\n

Read Next: 10 Used Cars That Will Last Longer Than the Average New Vehicle<\/a><\/p>\n<\/p>\n

While some expenses do change in retirement, trying to plan for a lifestyle that is similar to the one you live now can help you make sure you have enough saved and invested when the time comes. Retirement experts offered tips on how to figure out just how much you\u2019ll need in retirement based on current spending<\/a>.<\/p>\n

The simplest way to turn your current monthly spending into a target retirement budget is to determine what you actually spend each month without guessing, according to Evan Patzer, life insurance and retirement strategizing specialist at LifeWealth Solutions<\/a>. \u201cRemove work expenses, add retirement ones like travel and healthcare, and that\u2019s your baseline.\u201d<\/p>\n

Learn More: The Money You Need To Save Monthly To Retire Comfortably in Every State<\/a><\/p>\n

To get more granular, Jay Zigmont, a CFP and founder of Childfree Trust<\/a>, suggested doing the following math: \u201cThe rough math is that you need 25 times your current annual expenses in investments to retire.\u201d So, if you spend $40,000 per year, you need $1 million to retire, based on the Safe Withdrawal Rate (SWR) of 4%, he explained.<\/p>\n

Of course, the average household spends far more than $40,000 per year, but that gives you a clear sense of the math involved.<\/p>\n

When adjusting today\u2019s spending for inflation between now and retirement<\/a>, Patzer recommended using a 3% inflation rate (slightly higher than The Fed\u2019s target of 2%), though this may apply more to healthcare and lifestyle spending, he said.<\/p>\n

Zigmont urged, \u201cDon\u2019t worry about getting it exactly right this second, as there are too many factors to consider. As you get close to retirement, you will want to meet with a CFP to look at your entire retirement and tax plan, to do simulations and create a drawdown plan.\u201d<\/p>\n

Zigmont explained that spending in retirement tends to look like what finance professionals call the \u201cretirement smile.\u201d You spend more when you first go into retirement as you check things off your bucket list, then it tapers off for a while. Eventually, your spending goes up at the end of retirement due to the high costs of long-term care.<\/p>\n

It might be hard to guess which expenses to plan for being higher in retirement<\/a>, but Patzer suggested that you can usually expect work costs, mortgage payments and child expenses to decrease. \u201cTravel, healthcare and leisure spending will typically rise in retirement. In retirement, you shift from obligations to experiences.\u201d<\/p>\n

The biggest expense to budget for, and maybe even over-budget for, is healthcare. Patzer pointed out that if you retire before Medicare, you should prepare for double the costs until Medicare age.<\/p>\n

However, Zigmont pointed out that there is no way to know what Medicare will truly cost in the long-term, say 10 to 20 years from now. \u201cThe greater challenge is planning for long-term care. Medicare does not pay for long-term care, and Medicaid only pays once you run out of assets.\u201d<\/p>\n

He worries that with Medicare cuts on the table currently, \u201cit may not be a safe fallback anymore.\u201d He pointed out that a year in a skilled nursing facility runs around $125,000 on average. \u201cIn today\u2019s dollars I encourage clients to set aside $500,000 for long-term care or to buy a stand-alone long-term care insurance plan.\u201d<\/p>\n

Paying off your mortgage will help dramatically lower retirement expenses<\/a>, naturally, Patzer said. Additionally, downsizing or tapping home equity can create flexibility and liquidity.<\/p>\n

Zigmont pointed out that moving to an area with a lower cost of living can make your retirement savings go further. Pick a state with no income tax on retirement and it can save you up to 10% on state taxes, he said.<\/p>\n

When it comes to Social Security, delaying benefits to the maximum age of 70 can also help increase future retirement income, Patzer said, but you have to be careful to coordinate with your other assets. \u201cOptimize total lifetime income, not just the benefit amount.\u201d<\/p>\n

Additionally, Zigmont pointed out that Social Security should be seen \u201cas an adjunct to your savings, not a replacement.\u201d Additionally, for anyone under 45, plan to receive a reduced amount of Social Security, or possibly none, depending on what happens to the solvency and direction of the program.<\/p>\n

Even if you have your doubts, Patzer encouraged everyone to plan for longevity financially. \u201cEveryone should plan to live to age 95 and include at least one guaranteed lifetime income source. This way they can spend confidently without worrying about outliving their money,\u201d he said.<\/p>\n

By using your current spending as a guide and factoring in future inflation, healthcare costs and lifestyle changes, you can create a realistic plan that helps you retire with comfort and confidence.<\/p>\n

More From GOBankingRates<\/p>\n

This article originally appeared on GOBankingRates.com<\/a>: How To Figure Out Your Retirement Needs Based on What You Spend Now<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Your current spending isn\u2019t just reflective of how you live now; it can be a predictor of how…\n","protected":false},"author":2,"featured_media":248344,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,116107,133,87085,131,132,1705,3321],"class_list":{"0":"post-248343","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-evan-patzer","12":"tag-finance","13":"tag-jay-zigmont","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-retirement","17":"tag-spending"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/248343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=248343"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/248343\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/248344"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=248343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=248343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=248343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}