How to Accurately Estimate Your Retirement Spending Needs for a Realistic Plan

Planning for retirement is exciting. You’ve worked hard, paid your dues, and now it’s time to start envisioning a future where your time is yours. But before you pack your bags for that dream beach trip or start shopping for an RV, let’s talk about the part most people wish they could skip—estimating retirement spending needs.

It may not sound glamorous, but accurately estimating your retirement spending is one of the most important steps toward realistic and secure retirement planning. Without it, you’re sailing without a map.

At B.I.G. Investment Services, we help folks just like you get clear on the numbers—so they can enjoy their retirement, not stress over it. Whether you're in Kent, Sussex, or Salisbury, we're here to walk you through it, step by step.

Why You Need to Estimate Retirement Spending Before You Retire

You wouldn't build a house without knowing how much lumber, wiring, and labor you'll need—so why retire without knowing what it will cost to live the life you envision?

Here’s why accurately estimating your retirement spending needs is a non-negotiable:

Avoid Outliving Your Savings

Imagine this: you retire with a solid nest egg, but without a clear plan, you spend more than you should in the early years. Fast forward a decade, and suddenly, you’re worried you might run out of money. No one wants that kind of stress during retirement.

Estimating your spending now helps you pace yourself, so you can enjoy every stage of retirement without financial anxiety.

Spot Income Gaps Early

Will Social Security or a pension be enough to cover your expenses? What about your savings or potential investment income?

Estimating your retirement costs allows you to pinpoint any shortfalls early, giving you time to adjust—whether that means saving more, working a little longer, or exploring new income streams.

Design Your Dream Lifestyle

Retirement looks different for everyone. Maybe you’re planning to travel the world, start a side hustle, or simply enjoy quiet mornings on your porch with a cup of coffee. Whatever your vision, your retirement budget should reflect you.

Estimating your spending lets you see what’s realistic and helps you prioritize what matters most.

Be Ready for the Unexpected

Life happens—even in retirement. Medical bills, home repairs, or economic downturns don’t take a break just because you’ve stopped working. A well-thought-out spending estimate includes a cushion for those “just in case” moments, so you’re prepared for whatever life throws your way.

So, Where Do You Start?

It might feel overwhelming, but estimating your retirement spending doesn’t have to be complicated. Start by looking at your current expenses and lifestyle. What will stay the same? What might change—like commuting costs or downsizing your home? From there, layer in the extras you want for retirement, like hobbies, travel, or splurges.

Now, let’s dive into how to make that estimate as accurate—and actionable—as possible.

Approaches to Estimate Retirement Spending Needs

There’s no one-size-fits-all approach to retirement budget planning. That’s good news—it means you can tailor your estimates to suit your lifestyle, goals, and personality.

Use the Percentage Rule (Quick Estimate)

A common method is to assume you’ll need 70–80% of your current annual income in retirement. Why less?

• You may pay less in taxes.

• You might not be commuting or contributing to retirement accounts.

• The mortgage might be paid off.

Pro tip: This is a good starting point, but it's best to fine-tune with more specific numbers.

Build a Detailed Retirement Budget

For a more accurate plan, list every expense you expect to have in retirement. Yes, it takes more effort—but it pays off.

Key Retirement Expense Categories:

• Housing – Mortgage or rent, property taxes, home maintenance.

• Healthcare – Medicare premiums, supplemental insurance, out-of-pocket costs.

• Food & Dining – Groceries, restaurants, meal delivery.

• Transportation – Car payments, insurance, fuel, repairs, public transit.

• Leisure & Travel – Hobbies, entertainment, vacations.

• Utilities & Bills – Electricity, water, internet, phone.

• Insurance – Life insurance, long-term care policies.

• Taxes – Don’t forget taxes on retirement income!

• Gifts & Donations – Supporting family, charities, or causes you care about.

This is where B.I.G. Investment Services can help you not miss a thing. Our advisors work with you to build a budget that reflects your goals and real-world costs.

How Your Expenses Might Change in Retirement

Retirement isn’t just a huge life change—it’s also a big shift in how, where, and why you spend your money. Some expenses will naturally go down, and others might surprise you as they creep up.

Costs That May Decrease

Good news first: some costs just naturally shrink when you leave the 9-to-5 behind:

• Work-related expenses: Say goodbye to commuting costs, dry cleaning, fancy work clothes, and those daily lunch outings. Your wallet will thank you!

• Mortgage payments: If you’ve paid off your home—or are close to it—you’ll feel a big financial weight lifted.

• Family obligations: Expenses like your kids’ college tuition or other financial support might be in the rearview mirror by the time you retire.

Costs That May Increase

On the flip side, some costs tend to rise in retirement, especially when you finally have the time to enjoy life. Here’s what to look out for:

• Healthcare costs: Even with Medicare, out-of-pocket expenses for healthcare and prescription medications often climb as we age.

• Travel expenses: Retirement is your time to explore the world! Whether it's a family visit or a dream trip abroad, travel costs can spike during your early, more active retirement years.

• Entertainment and hobbies: With more free time, you might find yourself picking up new (and sometimes expensive) hobbies or spending more on activities like concerts, golf, or dining out.

• Long-term care: As you age, you might need extra support, whether it’s in-home care or assisted living. These costs can add up quickly, so it’s smart to plan for them early.

It’s all about balance. By understanding which costs will shrink and which might grow, you’ll be better equipped to adjust your retirement budget and focus on enjoying life to the fullest.

Don’t Forget Inflation and Unexpected Costs

You know that gallon of milk that used to cost $1.50 but now feels like you’re buying liquid gold? Yeah, that’s inflation at work—and it doesn’t take a break when you retire.

Why Inflation Matters

Even a so-so inflation rate of 2–3% can eat away at your purchasing power over the course of a 20- or 30-year retirement. Think about it: $50,000 in annual expenses today could balloon to over $90,000 in 25 years with just a 2.5% inflation rate. That’s a big jump!

But inflation isn’t the only concern. Life happens (as you probably already know). Unexpected costs like a sudden medical event, a major home repair, or a family emergency can throw your carefully planned budget completely out of whack.

How to Protect Yourself

Here are a few ways to safeguard your finances:

✔️Build a cushion into your retirement budget to account for rising expenses.

✔️Set up an emergency fund specifically for those “just in case” moments.

✔️Review your plan regularly with a trusted financial advisor to ensure it stays flexible and realistic.

Planning for retirement doesn’t mean you have to stress over every dollar—you’ve earned the right to enjoy this phase of life! By staying aware of these potential shifts in expenses, you’ll feel more confident knowing you’re prepared to handle whatever comes your way.

How Financial Advisors Use Spending Estimates to Plan Income and Savings Goals

A detailed expense estimate isn't just for your peace of mind—it's also the foundation your financial advisor uses to build your retirement strategy.

Here’s how we make it happen:

First, we figure out your total expected annual expenses in retirement. We’ll work with you to get a realistic picture of your future budget—covering necessities, hobbies, travel plans, and even the little indulgences that make life enjoyable.

Next, we look at your guaranteed income sources. Think Social Security, pensions, or any other steady income streams. These help us understand what’s already covered and where the gaps might be.

Then, we calculate the income gap. This is the difference between your expected expenses and your guaranteed income—and it’s the key to figuring out how much your retirement savings need to generate.

Finally, we reverse-engineer your savings goals. Based on that income gap, we’ll pinpoint how much you need to save and invest today to hit your retirement goals comfortably and confidently.

At B.I.G. Investment Services, we don’t just crunch numbers—we turn complex financial planning into something that’s simple, approachable, and tailored to you. 

Estimate Retirement Spending with Confidence—We’re Here to Help

At B.I.G. Investment Services, we’ve helped hundreds of individuals and couples in Kent, Sussex, and Salisbury not just plan for retirement—but thrive in it.

Whether you’re a few years away from retirement or already enjoying it, knowing how to estimate retirement spending can make all the difference.

We take the guesswork out of budgeting, investing, and income planning—so you can focus on living the life you’ve dreamed of.

Ready to Build a Realistic Retirement Plan?

Contact B.I.G. Investment Services today to schedule a personalized retirement planning session. We'll help you create a spending plan that aligns with your goals, values, and financial reality—so your retirement years can be your best years yet.

Disclaimer:

Investing in securities involves risks, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful. Boothe Investment Group, Inc. does not provide tax or legal advice. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.