“The question isn’t at what age I want to retire, it’s at what income.” – George Foreman
It is often very helpful to know how much you can – and cannot – spend in retirement before you need to worry about running out of money in your lifetime.
Ideally, we spend most of our working lives saving for retirement. When you’re getting prepared to retire, take the time to get a good, detailed financial plan done so that you know how much you can, or should, spend in retirement. At the heart of the matter, this is really just one big math problem and the nuanced hand of a retiring specialist can be immensely helpful in getting to a solid plan and then using it properly to help make critical financial decisions.
Some recommend the 4% spending rule, where you take 4 percent of your investments out of your portfolio each year, while letting the rest grow. Some recommend spending 80% of your pre-retirement income. These are nice sound bites but not necessarily good advice for your circumstances. Before you retire, let someone do your math so you can make an informed decision about how much you really want to spend.
There can be an important emotional and behavioral difference between an answer that says you can spend about $4000/mo. in retirement and one that more specifically says you can spend $4000/mo. in retirement with $200 a month in wiggle room. When you have a clear understanding of the numbers, you will likely be much more comfortable in moving forward with your retirement decisions. If you find yourself struggling with the retirement decision, you are not alone and often times the math can be the thing that provides the confidence you are seeking before making “the” decision.