Estimate Your Expenses

The next step is to estimate your retirement expenses. Consider your current expenses and how they may change after you retire. For example, you may spend more on health care as you get older but less on items such as clothing or vehicles. The following categories may help you estimate your retirement expenses:

• Taxes (federal and state, real estate, personal property)
• Real Estate (mortgage payments, insurance, maintenance, second home costs)
• Utilities (electricity, gas, water, trash, phone, cable/satellite/Internet)
• Vehicles (loan payments, insurance, license, maintenance)
• Health Care (medical insurance, out-of-pocket costs, prescriptions, glasses, vitamins)
• Personal Care (toiletries, cosmetics, haircuts)
• Food (groceries)
• Clothing (new clothes, laundry soap, dry cleaning, tailoring)
• Vacations (travel, lodging, food, entertainment, souvenirs)
• Entertainment (restaurants, tickets, movie rentals, books, CDs)
• Savings/Contributions (charities, education savings)
• Memberships/Licenses (golf or health club, social club, professional organization)
• Miscellaneous (gifts, agazines, newspapers)

Analyzing your retirement income and anticipated spending can help you determine whether your retirement plan is on track for your lifestyle goal. You may want to review the allocation of your personal investments and reallocate your assets if necessary. As with any part of your financial plan, review and update your retirement budget each year (or more often if there is a major change in your life).