Welcome to how to retire on time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much talk about it all. That said, please remember, this is just a show.

Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen. David, thanks for joining me. Hey.

Yeah. Glad to be here.

David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in by either texting them to 913-363-1234. It's 913-363-1234. Or you can email questions to heymike@howtoretireontime.com. Let's begin.

Hey, Mike. How do you figure out how much you will spend in retirement?

This is a common exercise and a common question that that people go through. It's interesting. There are 2 camps that I find with people that I work with. One camp seems to be extremely diligent in tracking every penny they spend. I've met people that had Excel sheets basically going as far back as Excel was invented.

I mean, just years years years of tracking every penny. And some people just know that they're making more than they're spending, and they're just kind of okay with that. It's this group that tends to have the issue of, well, how much will I spend in retirement?

Yeah. It makes sense.

So let's let's go through an exercise that you can do if you're in that group or maybe you're not. Maybe you just want to do a budget exercise. I wouldn't even call it a budget exercise. It's more of a spending awareness exercise.

We're not going

to try and restrict your spending. We're going to try and understand your spending. And then we're going to be able to kind of bring it back and talk about what to do with this information. So first off, here's a fun exercise. Go to your bank.

Go to your credit cards companies and just print off the transactions that you've spent on all of them for the past 3, 4 months. You can go back to the very beginning of the year. You can do a 12 month look back. But I think 3 months or so, you can start to pick up trends. And then what you're gonna do is you're gonna just take it and you can either put it into Excel or you can just hand write it and kind of calculate things.

Whatever is simplest for you. Whatever you're more familiar with. And start putting things into different categories. Now, for me and how I recommend putting together spending plans, I I would call them 2 spending plans or 2 buckets. You've got your lifestyle spending, which is flexible.

Completely flexible. It's not committed in any way. You can change whatever you want, the the the different amounts in different categories. And then you've got your committed expenses. A committed expense means you really have no say over the matter.

You're gonna pay your mortgage. Right? That's a committed expense. It's a part of your monthly cash flow regardless. If you have a car payment, that is a committed expense.

If you have student loans and you're helping out your your son or daughter, utilities typically fall under committed expenses because most people like the lights on.

Yeah. We do.

And they like the water running. So when you understand your committed expenses, you now understand the baseline of of things that just have to get paid for. Food is not in the committed expenses category. Why? Because food is such a lifestyle variable.

Some people, when they retire, want to eat out a lot. That's a lifestyle decision. And so it might be larger in the spending plan. Some people are extremely healthy and say, you know, I just I don't like eating out. It's too greasy or too many calories.

The portions are too big, and they prefer to eat inside. They prefer to cook, and they prefer to spend their money in in different ways for their lifestyle. So it's more of a flexible plan. It's not that you won't spend money. It's that you have the ability to make changes.

So maybe you say, you know, our expenses are x in the lifestyle side of things. But I really, really wanna go on this cruise. I know it'd be kind of tight. Let's just eat out a little bit less this month and next month and just start saving some money that maybe that will put us over the gap. You can see where this is going.

Right? The lifestyle is flexible enough. You can start adjusting things to get more out of your money based on your current cash flow. When you start to understand these two dynamics, then you can start to shape your retirement. Let me dive down to each one and how it translates to retirement.

Many people retire with a mortgage. Many people get a new mortgage when they retire. They refinance into another 30 year mortgage or a 15 year mortgage or whatever it might be. We just need to calculate for that. It's not necessarily wrong.

We need to understand how to live within our emotional and economic limits. Some people are comfortable emotionally with a mortgage and retirement. Some people would just prefer to have that paid off. Everyone's different. But that's that's kind of the idea is you need to understand your baseline, the things that have to get paid so you're not destitute.

You're not getting kicked out of your house. You're not getting foreclosed. Things like that. And then the lifestyle side of things, you need to start to think from an abstract position. If I had more time, would I spend more money?

So let me clarify what that really means. Yeah. Some people, when they retire, want to just travel the world. In those situations, their lifestyle spending plan will probably increase when they retire Because they have more time, they wanna do other things that they would not be able to do while they're working. Other people and this is actually more common than than I think is publicly accepted.

Many, many people don't care to travel. They don't care for the long trips. They just they love their garden in the backyard. Right. They love the fishing trips that are within their area.

Apparently, there's a lot of great fishing at least here in the Midwest. Mhmm. Right?

Yeah. There is.

Or or a hunt and trip or they have very cheap hobbies. And this goes back to the study that was done years ago that claimed money can't buy you happiness. Well, that's not true. What the research actually found was at a certain point, once your basic expenses are covered, so you can afford food and and shelter and your basic needs. More money will only help certain people become happier.

So someone that just cares about fishing and maybe a Topgolf membership, they live a very simple life. They don't know what to spend more money on. And so increasing their retirement income isn't gonna make them happier. So it's not it's not necessarily important to them.

Sure. Yeah.

But for other people that have charitable intent, they wanna be very involved in the community and wanna be able to gift their money and that brings them happiness. Then more money is gonna be more important to them. Everyone is just so different. And so you got to understand first, if you have more time, how does that affect your lifestyle spending plan? How much of a burden do you have in committed expenses?

And then you can start to shape what what your retirement could look like.

Yeah. So I guess that is a little bit of a cliche, at least, that that I have in my mind of retirees with their, like, sort of safari hats on and

there are cameras around their their neck. Right? And they're Oh, man. Off. The American cliche.

Yeah. But one thing that my mother and my in laws have been saying lately is the airports aren't for old people. Too much walking, too long distances from the gate to the baggage claim. And so they're You

know, that brings up actually an important point. The first couple of years of retirement, your lifestyle spending plan, while you're healthy, might be excessive. Because at some point, you're not gonna be as healthy. Right. You're not gonna wanna run through the airport, you know, like Home Alone dashing through to try and catch your flight or whatever it is.

You know, you're the connections through Atlanta that are always so stressful. So this dives into even more specific planning in retirement is maybe you increase your lifestyle spending plan for the 1st 5 years so you can really get the the the honeymoon season out of the way for retirement and then settle back into more of a day to day lifestyle that's still fulfilling. It's still wonderful. It's purpose driven. But maybe you don't need to spend as much.

That that spending more isn't necessarily gonna make you happier because you're already happy. And then on that study real quick, there are some people that are just always nervous. They're always stressed out. They're always anxious. Money can't fix all problems.

There's also some self evaluation, some self, I don't wanna say therapy. I'm not a therapist. But just some behavioral shifts that may need to happen just to be happy. And that's a whole another conversation for itself. But just as a quick summary, if you're trying to figure out how much money you need to spend in retirement, download some statements, break it down, look at your lifestyle spending plan and a committed spending plan.

Break those into 2. Bring them together. Understand where your money would be going. Figure out if you had more time, would what you're spending on be sufficient or would you want to spend more on other things? And how long would you wanna continue spending more money on those other things?

That that's the idea. And then then you gotta take that and then put it into a plan. Then you look at how to get more out of your hard earned money, and then you start talking about investments and products, how to bring it all to life. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast.

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