Kennon Financial: How Much Does it Cost to be Retired?

Cropped view of woman holding a tropical drink

Dave Kennon, Kennon Financial

You need $1,000,000 to retire, right? Not in my experience. Many people are surprised how little money is needed monthly in order to afford a comfortable lifestyle once you retire.

I have done retirement budgeting with hundreds of people in the Sarasota area, and today I am going to review some of the conclusions.

First, let’s take a look at a normal retirement budget.

Here are items (and approximate cost) that I see on almost every budget.

Assumptions:

  • Married couple
  • No mortgage
  • Live in single family home
  • Have one car they are still paying on
  • Go out to eat once a week at a nice restaurant
  • Annual expenses are shown monthly
Budget ItemCost
Mortgagen/a
Property Taxes$300/mo
Home Insurance$300/mo
HOA Feesn/a
Electricity$250/mo
Water/Sewer/Garbage$70/mo
Cell Phone$100/mo
Cable/Internet$200/mo
Pest Control$50/mo
Lawn Service$100/mo
Maintenance/Repair$200/mo
Car Payment$400/mo
Gas$100/mo
Auto Insurance$150/mo
Groceries$500/mo
Eating out$400/mo
Clothing$100/mo
Beauty/Barber$150/mo
Vacations$400/mo
Gifts/Tithes/Charity$200/mo
Medicare Premium$134/mo per person ($268)
Medicare Supplement$200/mo per person
Dental$50/mo
Miscellaneous$200/mo
Total$4700/mo

Surprised? Most people are.

If you don’t have a mortgage, almost everyone falls into the category of needing $3000-$6000 a month once they are retired. And this pays for a nice life! You’re not staying at home with the air conditioner set to 80 degrees. You are leading a full and active retired life.

Of course, your situation may be different. If you still have a mortgage, add that to the total. Maybe you don’t have cable. Maybe you spend more money on eating out.

The point I’m trying to make is this: Most Baby Boomers nearing retirement have no budget and no real idea of what their expenses will be once they retire. I hope this gives you a better handle on the numbers.

Retirement financial facts you need to know.

Let’s speed-round a few points about retirement and money that you absolutely need to know so you can retire with confidence.

#1 You don’t need $1 million to retire. The headline pretty much sums it up. Most people can retire comfortably with far less than a million bucks in the bank.

Glad we got that one out of the way up front. Here are a few more.

#2 Social security is more than you think. The average social security check is around $1500 a month. So if you are married, your combined social security could cover more than half of your living expenses. In fact, I’ve met many frugal people who are living a very full life on $3000/mo.

#3 You’re not going to spend as much in retirement as you do in your 50s. The government data is very clear. Your 50s are the most expensive decade (401k contributions, kids in college, paying toward the mortgage). Spending in your 60s will be your peak spending years in retirement. Spending starts to slow in your 70s and comes down dramatically in your 80s and 90s.

In fact, The difference in spending from your late forties to early seventies is a whopping 41%.

#4 You’re not going to be destitute and die penniless. It’s a fear my clients share with me every day. But, it’s not based in reality. Only 12% of people in the U.S. die with no assets (living only on social security).

Most retirees are surprised at how little in taxes you need to pay once you retire. Click here to read a past article on the subject.

Your homework assignment: A retirement budget.

So now it time for you to make your retirement budget. I would encourage you to go through the same exercise I just took you through and use your real numbers. Making a budget for retirement can be incredibly empowering, and for most people, it gives them relief. Relief knowing that maybe you don’t need to worry so much about money. Relief knowing that “outliving your money” is not nearly as big of a concern as you may have thought.

If you are in the Sarasota area and would like more information about getting the most LIFE out of your retirement, please join me for one of my upcoming Retirement Revolution Workshops. If you are outside the Sarasota area, you can get more information in my eBook, Spend More Worry Less. You can also subscribe to my blog and newsletter, and check out my podcast and videos.

Be Blessed,
Dave

P.S.- Here is the full retirement budget worksheet I use with my clients if you need a little nudge in the right direction. If you want to enter in your own information- go to “File” and then “Download as” and choose file type “Microsoft Word.”

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