Weekend Reading: An Easy Way to Find How Much You Will Spend in Retirement

Posted: 07/22/2022

|Kiplinger |Spending in Retirement

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.

Weekend Reading

Knowing how much money you need to sustain a comfortable retirement begins with having a firm understanding of how much you spend, and there is a simple way to figure that out.

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Building your income house: To calculate the amount of money you spend each year, take your monthly bank statement(s), of which all bills are paid, and add up the last 12 months’ worth of expenses. This total can be 30 percent or more higher than what is expected, and in a world where retirement might span 20-plus years, creating an income stream to cover this may seem daunting. However, an easy way to better understand the creation of your retirement income plan is to view it as a house, containing:

📌 Your foundation: The money in your foundation needs to cover your core expenses, and therefore must be secure and predictable. It can include funds from areas such as Social Security, pensions and rental properties.

📌 Your walls: Just like walls provide protection and safety to a house, these funds are low volatile, relatively safe investments which might be utilized for special occasions, vacations, hobbies, etc. They can include certificates of deposit, fixed annuities and bonds.

📌 Your roof: Meant to be used on a 10-year time horizon, these investments are riskier, and should lend to financial growth as they keep up with inflation. They can include funds from stocks, mutual funds, exchange-traded funds, real estate investment trusts (REITs), variable annuities, etc.

Make note: Deciding when you can retire has little to do with how much you’ve saved, and EVERYTHING to do with how much you’ll spend.

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