Earlier this week, I was watching Bloomberg at about 5 AM, and a poll streamed across the board. The poll was in regards to safety and the Coronavirus, it stated that over 57% of Republicans believe we should open up businesses now and lift restrictions. The poll also stated that over 60% of Democrats believe that we should not lift restrictions and open businesses. This poll might be right or it might be wrong. As I thought more about this poll, I thought of the age-old question of retirement planning, is it better to plan for the worst or plan to achieve the best?
A few weeks ago, we started utilizing Zoom for progress reviews with clients. One of the main topics for this quarter is to review current and future expenses. As a financial planner, the cornerstone of determining how much you need to retire is dependent upon how much are your living expenses.
You Need a Budget.
The dreaded (for some) budget word comes into play. Some people plan to travel and enjoy their lives more when they retire. Others plan to maintain their current expenses and hope the monies last. The big question is should you plan for the worst? During times like these, where most of us are sitting at home and not spending extra monies on eating out or going on trips, we are living well within our normal means. If you calculate how much you are currently spending over the last 30 or so days, you can create your minimum required budget. Just index it for inflation for when you retire, and you can see how much you need on a monthly basis.
Alternatively, you could decide that sitting at home and not eating out or traveling is no fun in retirement. Then you could look back over a year ago at your expenses and exclude the last few months and determine your average expense. You might want to add an extra amount of money per year for an extra trip or two. Then index this average amount for inflation and you can figure out how much you would need in retirement.
To assist in this effort, here is a link to a fillable budget worksheet that will help you determine how much you spend.
There is a lot of planning that can be done once you know how much you want/ need to spend each month in retirement. If you would like to share your budget sheet with me, feel free to share and I can help you navigate the ability to reach your retirement expenses.
Plan Today. Protect Tomorrow.
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