Planning for retirement may look different for everyone, depending on lifestyle, income, family structure, and long-term goals. One place many people start when planning for retirement is by considering how much income they may need after they stop working. There is no universal income that applies to everyone, but having an income goal in mind for retirement can provide direction for saving and planning over time.
This goal doesn’t have to be final—it may shift with life changes, health needs, or adjustments in spending habits. Rather than aiming for a specific formula or percentage, some people begin setting retirement goals by estimating future expenses, evaluating possible income sources, and thinking about how long their retirement could last. Others may consider inflation, health care needs, and whether they plan to work part-time later in life.
This blog outlines a few general steps that may help guide your thinking as you consider your retirement target and how to approach it.
Estimate Your Retirement Expenses
To set a retirement goal, it can help to start by estimating how much you might spend annually after you stop working. That number may depend on lifestyle, location, healthcare needs, and other factors.
Some retirees aim to spend less than they did while working, while others plan for more travel, hobbies, or relocation.
Other categories to consider might include:
- Housing: Even if a mortgage is paid off, ongoing costs like property taxes, insurance, and maintenance can still contribute to your retirement budget.
- Food and utilities: Regular household expenses such as groceries, electricity, water, and internet tend to continue in retirement and may fluctuate based on location or lifestyle.
- Transportation: Whether you plan to keep a car, rely on public transportation, or travel seasonally, transportation needs can impact your budget.
- Travel and entertainment: Some retirees may plan for more leisure time, and these discretionary costs can vary widely depending on their activities and preferences.
- Personal spending: Clothing, personal care, gifts, and hobbies may all fall under this category and can shift as your daily routine changes in retirement.
Adjusting for inflation may also provide a more realistic income projection.
Adjust Your Goal Over Time
Retirement planning is not static. Checking ion your savings and revising your estimates can help you stay aligned with your retirement horizon.
Some people use savings rate guidelines or retirement calculators to project how their current habits may align with their goals. While those tools can be useful, they may not account for everything, like unexpected healthcare needs or shifts in the economy. Regular reviews of your portfolio and withdrawal strategy may help adjust for changing circumstances.
Here are a few steps that may be useful as you refine your retirement goal:
- Track current expenses to better understand future needs
- Estimate how inflation may affect your long-term budget
- Monitor investment performance and adjust contributions if needed
- Factor in milestones like paying off a mortgage or becoming eligible for Medicare
Having flexibility in your goal may allow you to respond to changing financial conditions, personal priorities, or shifts in retirement timing. Your estimated needs might change over time as health, family dynamics, or lifestyle preferences evolve. Building in room to adjust may make it easier to revisit your strategy if your circumstances shift.
Setting a retirement goal starts with estimating what you might need and exploring where that income may come from. Contact us today to learn how we can help you live retirement boldly and on your terms.
Investment advisory services are offered through Vantage Point Financial, a registered investment adviser. Registration with any regulatory body does not imply any particular level of skill. This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Working with a financial planner does not ensure financial success or prevent loss. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. The scenarios presented are hypothetical and are intended for illustrative purposes only. They do not reflect actual client results and are not guarantees of future outcomes. Individual results will vary. Certain financial strategies may offer tax advantages, but outcomes depend on individual circumstances and are subject to change due to tax laws and other external factors. Vantage Point Financial does not provide legal or tax advice. Consult a tax professional. Retirement outcomes depend on a variety of factors, including individual savings behavior, market performance, health events, and other considerations. Certain statements herein may reflect the firm’s current views, expectations, or beliefs, which are subject to change without notice. For additional information about our services, fees, and disclosures, please refer to our Form ADV Part 2A, available at https://vantage-point.mwdevsite.com or upon request at no cost.
