The first question to ask yourself in retirement planning is: Do I want to live at a level less than, equal to, or more than my current standard of living? We chose to keep our current standard of living, but you need to start there; you can’t know how much is “less” or “more” until you’ve figured out what “is.” I have produced a monthly cash flow statement that tracks every penny in and every penny out for almost 30 years now and highly suggest this exercise as a way to get a factual view of where your money really goes. Bank and credit card statements are not granular enough for me. This data took the guesswork out of retirement income planning. I posted a basic copy of the spreadsheet I use here.
Our monthly/annual spend has not changed much in retirement. Some of my spreadsheet categories have gone, some added, some increased, some decreased, but the overall annual spend has remained pretty consistent. After tracking this detail for years and knowing that we wanted our retirement lifestyle to remain consistent with our working lifestyle (or a bit higher), our savings and investment strategy was built on achieving that level of sustained annual income.
I found that just because things like work-related expenses, education costs, and mortgages may go away, other costs happily take their place (you know, nature abhors a vacuum and all), so I didn’t concern myself too much with how the underlying buckets would change in retirement, I just needed a firm handle on our aggregate annual cash flow which turned out to be surprisingly consistent year over year regardless of how our lives changed.
This history was critical to forming the retirement plan we established with our FA who asked us a series of questions that became our retirement roadmap. She also told us something I found very helpful when it came time to step off the corporate merry-go-round and we were trying to fix on a date. She said, “Retirement is a faith position. You’ve done the work and you’ve gotten where we agree you need to be. You need to believe in that work. You’re good to go.” We’ve been retired eight years now, no surprises because the plan was sound and based on hard data.