I Just Retired – How Much Can I Afford to Spend Each Month?

Table Of Contents

    You’ve retired and are ready to get on with the rest of your life. But you may be a little nervous, as many people often are when entering retirement. Unsure that you’ve saved enough and wondering how much you can safely afford to spend each month.


    The big day has come and gone. R-Day…the day you left the office for good, heading off into the next chapter of your life. Something you’ve been looking forward to for many years.

    So now that you’ve retired and it’s time to get on with the rest of your life, you might be feeling a little nervousness – trepidation. No, not a hangover from the retirement party. This is not something a couple aspirin can clear up.

    This is actually a condition many people in your same shoes go through when transitioning to their post-retirement life. It’s called, “Whatcanispenditus,” and it can be a nasty bug.

    No need to get too worked up though…more bark than bite.

    In fact it’s normal that people nervously contemplate whether they have enough saved for retirement at this stage. The fact you find yourself in that very same boat now is largely to be expected.

    To be clear though, the question of whether you have enough saved at this point can be tough to answer and is sort of squishy. You need something more concrete. What you probably should be asking is how much you can safely afford to spend monthly and annually.

    To answer that question you need to think about your retirement plan. If you happen to already have a retirement plan in place it’s time to go back and reexamine it. If not, then it’s definitely time to create one at this point, especially given you’re now retired.

    As part of that process you’ll also need to think about something few people like or are comfortable with. The dreaded “B” word. Yes, that’s right – budget. Expenses, income…

    Yikes, who wants to deal with a budget at this point in life? Well, you can’t determine how much you can afford to spend without having a budget.

    So, it’s time to roll up your sleeves and get busy budgeting. Doing so will provide context and insight regarding what you will need in order to pay your bills while maintaining a standard of living you are comfortable with in retirement.

    A word of caution before you put pen to paper. While you can do this on your own, it’s an involved process. There are lots of complicated financial, legal and tax issues and implications that must be taken into consideration, no matter the amount of assets you do or don’t have.

    As such, you may want to consider consulting with a retirement planner or financial advisor to ensure you’ve covered all the bases.

    Proper perspective

    Before getting going, you definitely want to make certain you have the correct perspective regarding the savings you have amassed to this point. A mistake many people make is to think of their total savings when considering what they can spend.

    You can’t do that, as it often leads to inflated views of what you have available. For example, if you have $600k saved, you can’t look at your finances like you have that amount available to spend. Instead, you have to look at how much you have to spend in each individual year.

    If you’ve created a budget or worked with a planner and determined you can spend $45k annually, then you have $45k to spend in that year, period. Pay attention to that number throughout the year. The moment you start looking at the entire pile of money ($600k), you’re likely to start making mistakes in your spending (e.g., overspending), which can really cripple your retirement later on.

    Rule of thumb

    If you’re like most, it’s tempting to look for shortcuts versus doing things the old-fashioned hard way, from A to Z and all points in between.

    You’ve probably heard some of the “rule of thumb” scenarios regarding what you can expect to be able to safely spend when you retire.

    So, let’s start with a couple that are often cited:

                4% Rule

    This is a general approach that allows for a retiree to safely withdraw four-percent of their savings the year they retire, followed by the same percentage annually thereafter (adjusted upward for inflation) for approximately 30 years.

    While this approach does get you in the general ballpark, it has shortcomings.

    First is the fact that things change from year to year. Some years you may need to spend more while others less. This can be due to factors such as lifestyle (travel, hobbies), goals (gifting and charity), health and medical needs, and others.

    Another is the fact that if you retire younger, or live longer in retirement than expected (which you can’t know in advance), this approach could leave you in a financial mess as you get older and have less ability to do something about a potential shortfall. Fact is that life expectancy has changed since the rule was first introduced, with people often living longer in retirement.

    Historical returns is another variable in terms of performance, which is a key factor underpinning this model. Well, this can cause a problem if there is a downward shift in returns for an extended period going forward. Fact is there have been such periods in the market in the past and this could happen again.

    There’s also the issue of risk built into your portfolio and how it performs each year. In a badly underperforming year (say a 15-percent hit to your portfolio) you could really end up with an even bigger dent in your savings were you to rigidly withdraw the four-percent. On the flipside, you may not need to withdraw that much in a year where you garnered outsized market gains. Flexibility is important.

    And there is the issue of taxes. Those are not optional and have to be paid regardless of the 4% rule, which translated may mean you can’t adhere to the rule in any given year. Over time failing to hold fast to the rule means you are eating into your money available for the future…a recipe for outliving your assets.

                70% – 80% Pre-retirement Income Rule

    Another rule of thumb approach is that of needing a percentage of your pre-retirement income to maintain your standard of living in retirement.

    The AARP suggests that a good monthly retirement income approximates 80% of what you brought in pre-tax before retiring. Part of this reasoning is predicated on the notion that what you pay in income tax might be lower, as well as job-related expenses that would have been eliminated in retirement.

    With this rule, if your pre-retirement income is $200,000 annually, equating to $16,667 monthly, you would need $140k to $160k annually, or $11,667 to $13,333 monthly, to maintain your standard of living in retirement.

    Again, there are issues with this approach, the main one being the fact it’s too general. It’s based on the standard of living you have while still working. That assumes you aren’t living beyond your means and are able to comfortably cover your bills.

    That standard may change considerably either upward or downward when you retire. It may change quite a bit over the course of your retirement as well.

                Key Government Estimates

    This isn’t a rule of thumb, but it provides some perspective in terms of highly informed estimates regarding average households when it come to expenses and income.

    The Bureau of Labor Statistics (BLS) estimates that the average American family expenditures for 2022 was $72,967. Meanwhile, the U.S. Census Bureau estimates that the medium household income in 2022 was $74,580. That equates to expenses taking up approximately 98-percent of household income for those families.

    Granted, inflation was the worst experienced in decades. What these key expense and income statistics point out is the fact that inflation in the past couple years has done serious damage to U.S. households, many that are now spending a major portion of their income just to make ends meet.

    Overall, when it comes to rules of thumbs and retirement, while they can give you a good starting point in terms of assumptions and planning, they aren’t granular enough to rely on. You have to really understand what your expenses are and what sources of income you’ll have to rely on, in addition to considering key factors, such as health, goals, discipline, comfort with risk, and more.

    As such, it’s best to move beyond rules of thumb and get serious about budgeting and planning when it comes to understanding what you can afford to spend monthly and annually in retirement.

    Standard of living consideration

    One last thing before we get to the nuts and bolts.  As you are transitioning into retirement, you need to honestly assess if you are comfortably covering the bills presently. If so, there’s a good chance you’ll be able to maintain your existing standard of living, as well as what you picture for yourself going forward.

    If instead you are stretched and maybe forced to rack up debt to do some travel, or even to meet your normal expenses, then there’s some serious considerations that you’ll have to address regarding the standard of living you’ll be able to maintain in retirement.

    You’ll want to include goals and special life scenarios (examples include supporting adult parents or adult children or grandkids, et. cetera), you and your partner’s health, travel plans, legacy, charitable sharing, and more. This is in addition to normal expenses and spending.

    All of these go into the standard of living you’ll have to support sans a paycheck, instead utilizing the collective income sources you’ve accumulated now that you’re retired.

    Calculating expenses

    Without further ado, let’s look at your fixed expenses first.

    Fixed – Many people aren’t clear on fixed expenses. Simply stated, these are bills where you pay the same amount each month. Examples are housing, utilities, transportation, property taxes, insurance, personal debt, and more.

    Housing – Own, mortgage or rent. The  BLS estimates that housing accounts for roughly 30-percent of the average household’s monthly income. Even if you have paid off your mortgage  you will likely still have housing related expenses, including property taxes and homeowner association fees.

    Utilities – Gas or electricity, waste disposal, phone services (home and mobile), cable and Internet, water, et. cetera.

    Vehicle Payments – The BLS estimates the average household will spend about 16-percent of their monthly budget on car loans or leases.

    Insurance – Can include homeowners or renters insurance, auto, life, disability/long-term care, and other types of coverage you pay for each month, excluding healthcare coverage. Overall, the BLS estimates that the average household spends 10-percent of their budget on their collective insurance costs each month, aside from LTC, which will often cost you even more each year you wait to purchase.

    Personal Debt – These are all the things you purchase or utilize using various means of financing, to include credit cards, personal loans, home-equity lines of credit, student debt, appliances, furniture, dental care, and more. Here’s another rule of thumb, but this one you should follow – try not to take debt of this nature into retirement.

    Other – This is everything else where you pay the same amount for a product or service each month, even though many view these as discretionary. This can include medication, streaming services (think Prime, Netflix or HBO), gym memberships, wine of the month club, weekly meal services, and more.

    Variable – These are expenses you pay each month that aren’t fixed. Many people incorrectly equate variable and discretionary spending, but that is not accurate. Variable expenses can be non-discretionary, such as eating, putting gas into your vehicle, going to the dentist, and much more.

    Food – According to the BLS, the average household will spend roughly 11-percent of the budget each month on food, with roughly 7-percent spent on groceries and 4-percent spent on restaurants and other food items prepared by someone else.

    Transportation – These are costs for vehicle repairs, scheduled maintenance, fueling your car up, and more. And for some there are the costs of public transportation to consider.

    Health-related – There are also separate expenses for healthcare that are variable. These can include occasional prescriptions, as well as non-prescription drugs, vitamins, treatments and other things that you will pay for out of pocket.

    Entertainment – The things you do for fun on a regular weekly/monthly basis, such as golf/tennis/bowling/pickle ball, theme parks, theater or symphony, ball games, outdoor activities and hobbies, and much more. If you do them with regularity then you need to account for them as a discretionary spend within your budget. The BLS estimates that the average household spends roughly 5-percent of their monthly budget on entertainment.

    Travel – You definitely need to account for travel, but it can be best to do so separately to ensure you’ve covered all the other bases in terms of expenses. In this manner, you know you have the funds available to jet off to the far corners of the world without risking having to finance the trip or forgo paying other necessary expenses.

    Assorted – Variable expenses that are generally discretionary and don’t fall into the aforementioned categories, including things like clothing, tolls and parking fees, personal care, home repairs, et. cetera.

    Paying for stuff

    A solid retirement plan requires that you take stock of the various means you have at your disposal in order to pay for stuff.

    When you were still working this likely included your salary, as well as possible income from side work, property, inheritance, non-qualified investing, passive income from other activities, et. cetera.

    Now that you’re retired you can cross off one of the big ones from that list – salary. This is where the retirement savings activities you diligently participated in for all those years comes into play. Those funds will now be used to replace some, if not most (or all), of the paycheck income you brought in while still working.

    Examples include tax-deferred dollars invested in individual qualified accounts (IRAs, Roth IRAs, annuities, etc.), employer-sponsored accounts, like pensions and 401(k)s, and non-qualified, such as brokerage accounts with stocks, mutual funds and bonds, as well as savings, annuities, CDs, and more.

    Other sources to remember at this stage:

    • Social Security (can start as early as 62 for partial benefits, or wait to age 67 for full benefits, or even age 70 for enhanced benefits)
    • Property/real estate (including rental payments)
    • Passive income
    • New career, part-time employment, owning your own business, etc.

    Overall, making yourself aware of available assets for retirement, including engaging in income planning to maximize them, is a major piece of the puzzle when it comes to retirement planning.

    Bottom line, you have to add up everything you have available that can be used to cover the expenses, net of taxes that will be due, to arrive at a number in terms of what you have to spend. Hopefully that number is in excess of what your total actual expenses are/will be.


    As demonstrated, you can’t afford shortcuts when it comes to determining what you’ll have available to spend each month and annually in your retirement. Guestimates and rules of thumb can leave you in a bad fix. Maybe not today, but over time they can leave you in a “outliving your savings,” scenario…a place no one wishes to end up.

    To avoid that scenario you have to do the work now. A full examination of where things stand and the establishment of a retirement plan that includes a solid budget.

    At the end of the day, you want to know what you can comfortably spend in a manner that covers those monthly expenses, allows for unexpected issues, is able to support you throughout the entirety of your retirement, and enables you to achieve goals you’ve set, such as estate planning to ensure your assets pass on in the manner you want to family and other beneficiaries.

    Given all the factors and variables, it’s best to work with a qualified financial professional. We here at  Oak Harvest can assist you. We can review your existing plan if you have one.

    Or we can assist by building a holistic, comprehensive retirement plan addressing relevant issues, utilizing strategies that cover taxes, income, spending, healthcare, LTC, legacy, and more, customized to your family’s specific scenario.

    A plan created with the goal of ensuring you have the best opportunity to live out the retirement you and your family envision.

    If you are ready to take the next step and talk to a team of qualified retirement planners who can advise on all your retirement needs, and who will put your interests first, Schedule a call today!

    Let Us Help You Achieve the Retirement You Deserve!

    Investment Advisory services are provided through Oak Harvest Investment Services, LLC a Registered Investment Advisor. Insurance services are provided through Oak Harvest Insurance Services, LLC. Oak Harvest Investment Services, LLC and Oak Harvest Insurance Services, LLC are not affiliated with the U.S. government or any government agency. Information presented is for educational purposes only intended for a broad audience. Not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.
    “Peace of Mind,” “Safety,” “Principal Protection,” “Lifetime Income, “Guaranteed Income,” or other guarantees are associated with fixed insurance products. No such language refers in any way to investment advice, investment advisory products, securities, or recommendations provided by Oak Harvest Investment Services. Investing involves risk. Rates of return are not guaranteed unless otherwise stated. All guarantees are dependent on the financial strength and claims-paying ability of the issuing insurance company. Annuities have limitations and are not appropriate for all circumstances or individuals. They are not intended to replace emergency funds or to fund short-term savings or income goals. Lifetime income may be available on certain products through an optional rider, at no cost or for an additional cost, depending on the contract. Insurance products are not insured by any federal government agency and may lose value. By contacting us, you may be offered information regarding the purchase of insurance and investment products.
    Oak Harvest has a reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment, or client experience. Oak Harvest has a reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to www.oakharvestfg.com for additional important disclosures.