budgeting for retirementBefore we can answer how much you’ll really need saved to retire, we need to answer this question: Well, what will your expenses be?

Not all financial advisors have the post-retirement budget discussion with their clients. Instead, they’ll use a standard percentage of a client’s yearly income, most frequently between 70-80%. But just like in life, the actual amount you’ll feel comfortable with is highly individualized. Maybe it’s 70%, maybe it’s 125%.

At Betzel Wealth Advisors, we believe that your retirement is too important to leave open to standard percentages and heavy estimation. It’s vitally important to talk through the lifestyle you want post-retirement, as well as possible scenarios where you may need a large cash influx all at once.

If you really start thinking about it, is 70% enough? Why would expenses go down as your leisure time goes up? While some costs may go down, like fuel costs since you won’t be commuting to work, other costs, like travel, will probably go up. In the article 6 Ways Our Brains Make Bad Financial Decisions, the authors argue that it’s human nature to underestimate your spending habits post-retirement, and that studies show the percentage needed is more like 135%.

So before you settle on your own “magic number,” here are some of the questions you’ll need to think about.

  • What age do you expect to retire?
  • Will you be willing to work part-time to supplement your income?
  • Do you plan on taking a lot of vacations?
  • What about other leisure activities?
  • Will you stay in your current home?
  • Do you anticipate any large home repairs during retirement?
  • Will you want to purchase a new automobile or other vehicle during retirement?
  • Do you have children who may require financial support in some way?
  • What about other emergencies?

At Betzel Wealth Advisors, we are experts at expecting what you might not expect. Give us a call today for your free, no-obligation financial review.