Will You Have The Money You Need, When You Need It?
Traditional planning tools group all your expenses together and inflates them for 20 or 30 years, to show you how long your money lasts. Unfortunately, real life is a bit more complex.
Calculating accurate income is the most critical exercise for a successful retirement. It requires precision, care, and the ability to ask the right questions.
Understanding Your Spending
We have learned that most people don’t really know how much they they spend. Getting those numbers right is critical. This is the one column of you plan that can never be empty! A good spending plan really begins with understanding your:
Baseline Expenses
These are the non-negotiable, recurring costs that form the foundation of your monthly budget regardless of lifestyle choices.
Housing
• Mortgage or rent payments
• Property taxes
• Homeowner’s or renter’s insurance
• HOA fees
• Home maintenance and repairs
Utilities
• Electricity, gas, and water
• Internet and phone
• Trash and recycling
Food & Groceries
• Weekly grocery shopping
• Household supplies (cleaning, paper goods, etc.)
Transportation
• Car payment or lease
• Auto insurance
• Gas and fuel
• Registration and licensing fees
• Routine maintenance (oil changes, tires, etc.)
Insurance (non-healthcare)
• Life insurance premiums
• Umbrella/liability insurance
Lifestyle Expenses
Discretionary spending that supports quality of life, hobbies, and personal enjoyment in retirement.
Dining & Entertainment
• Restaurants and takeout
• Movies, concerts, sporting events
• Streaming services and subscriptions
Travel & Leisure
• Vacations and trips
• Airfare, hotels, and cruises
• RV or second-home costs
Hobbies & Recreation
• Golf, tennis, fitness memberships
• Arts, crafts, and classes
• Gardening, fishing, hunting supplies
Personal Care
• Haircuts and salon services
• Clothing and apparel
• Spa, massage, and wellness
Gifts & Giving
• Holiday and birthday gifts
• Charitable donations
• Financial gifts to children or grandchildren
Technology & Gadgets
• New devices (phones, tablets, computers)
• Smart home equipment
• Software and app subscriptions
Healthcare Expenses
One of the largest and most variable cost categories in retirement, often underestimated in planning.
Insurance Premiums
• Medicare Part B and Part D premiums
• Medicare Supplement (Medigap) or Medicare Advantage premiums
• Dental and vision insurance (often not covered by Medicare)
• Long-term care insurance premiums
Out-of-Pocket Costs
• Deductibles and copays
• Prescription medications
• Dental work (cleanings, fillings, dentures, implants)
• Vision care (glasses, contacts, eye exams)
• Hearing aids and batteries
Medical Services
• Primary care and specialist visits
• Lab work and diagnostics
• Physical therapy or rehabilitation
• Mental health services
Long-Term Care
• In-home care or home health aide
• Assisted living facility costs
• Memory care or skilled nursing facility
Wellness & Prevention
• Gym memberships and fitness classes
• Vitamins, supplements, and OTC medications
• Preventive screenings and wellness visits
Tax Expenses
Taxes don’t disappear in retirement — and can increase depending on income sources and withdrawals.
Federal Income Tax
• Taxes on Traditional IRA and 401(k) withdrawals
• Taxes on pension income
• Up to 85% of Social Security benefits may be taxable
• Capital gains taxes on investment sales
State Income Tax
• State taxes on retirement income (varies by state)
• Some states exempt Social Security or pension income
Property Tax
• Annual property taxes on primary and secondary homes
• Note: some states offer senior property tax exemptions or freezes
Required Minimum Distributions (RMDs)
• Mandatory withdrawals from pre-tax accounts
• Potentially impact Medicare premiums (IRMAA)
Estate & Gift Taxes
• Federal estate tax (applies to larger estates)
• State-level estate or inheritance taxes
• Annual gift tax exclusion planning
The Unexpected Expense
Unexpected costs that require a financial cushion — critical to avoid drawing down investments prematurely.
Home Emergencies
• Major repairs: roof, HVAC, plumbing, electrical
• Appliance replacement
• Natural disaster or weather damage (deductibles)
Vehicle Emergencies
• Major repairs or unexpected breakdown
• Accident-related costs beyond insurance coverage
• Unplanned vehicle replacement
Medical Emergencies
• Emergency room visits and hospitalizations
• Unexpected surgeries or procedures
• Out-of-network care costs
• Sudden need for in-home or facility-based care
Family Emergencies
• Financial support for adult children or grandchildren
• Travel for family illness or funeral
• Legal or estate-related unexpected costs
General Reserve
• Essential expenses in liquid savings
• Separate from long-term investment portfolio
• Helps avoid forced withdrawals during market downturns
How does inflation play into the mix?
Let’s take a look at inflation rates for you most common expenses.
- General Living Expenses: 3.33%
- Healthcare Costs: 3.23% and accelerate as you age
- Housing: 3.81%
- Travel - Transportation: 2.24%
- Luxury Travel: 4.86%
- Nursing Home: 3.83%
- Private Pay Long Term Care: 4.95%:
Giving Generously And Building Wealth Aren't Mutually Exclusive.
Charitable giving offers the opportunity for considerable tax benefits through the use of:
- Donor Advised Funds (DAFs)
- Qualified Charitable Distributions (QCDs)
- Gifting highly appreciated assets
- Coordinating charitable goals with your estate plan
- Charitable Bunching
Things Change - Confidence In Your Income Plan Shouldn't
Your income strategy needs close attention and the ability to adjust along with:
- Market shifts & Tax law changes
- Large purchases or Real estate decisions
- Longevity & Unexpected medical costs
- Evolving family & Estate needs
Your investment plan is built to help you navigate these moments; Safe accounts available in the short-term, moderate risk accounts for mid-term needs, and aggressive growth for long-term and legacy needs.