Many people underestimate retirement expenses. Use an expense worksheet to separate essentials vs discretionary spending and plan for one-time costs.
Most retirement plans fail on the same step: expenses
Many people underestimate their expenses, and it’s smart to track spending for a few months to make sure estimates align with reality.
Before you can decide how to fund retirement, you need to know the types and sizes of expenses—because that drives how much income you’ll need.
The three buckets to plan for
Essential expenses: housing, utilities, food, clothing, basic healthcare
Discretionary expenses: travel, entertainment, gifts—things you can reduce if needed
One-time expenses: weddings, tuition, large purchases. Planning for these upfront can reduce the chance you’ll need to disrupt your ongoing plan later.
The most useful prompts to ask yourself
As you fill out an expense worksheet, questions like these help sharpen assumptions:
How many years are left on the mortgage?
Do you plan to move or downsize?
How will health insurance premiums change in retirement?
Should you budget for additional premiums like long-term care insurance?
Don’t set it once—monitor it
It’s as important to monitor expenses during retirement as it is to estimate them before retirement, because expenses change over time and the income plan may need adjustments.
Disclosure: This content is for general educational purposes only and is not individualized advice. Investing involves risk, including the potential loss of principal.