To Retire Safely, Make Smart Spending a Priority Along With Saving

At least 10 years before you plan to retire you should start taking a hard look at how much you're spending. Getting a handle on that number (and how to improve it) is key for a secure retirement.

The financial planning industry tends to put a big emphasis on how much you’ve saved for retirement, but that’s only half of the picture.

If you’re like the majority of retirees and soon-to-be retirees in the U.S., your No. 1 worry is that your nest egg won’t last as long as you do. And you’ve likely heard you’ll need $1 million or more to make it through.

Sure, it would be a plus to have that much money available. But I tell clients all the time that a successful retirement isn’t just about how much you’ve accumulated — it’s also about how much you spend.

I’ve met plenty of retirees who don’t have what most people would consider to be a whole lot of money saved, yet they’re living comfortably because they don’t spend more than they can afford. And I’ve met people with millions of dollars put away who probably won’t make it last. They fret every day, but they can’t seem to control their consumption.

It all boils down to good budgeting, and many people just can’t be bothered, especially while they’re working. They allocate some money for savings, or they don’t, and they spend the rest.

But when you’re closing in on retirement — 10 years out, at least — figuring out what you’re spending becomes incredibly important, because it sets the stage for what comes next.

Remember: When you’re retired, every day is Saturday. Will you want to travel, take up new hobbies, go to the movies or play golf more often? All of that will take money.

Here are steps you can take now to prepare for a more successful future.

1. Get a handle on how much you’re spending now, while you’re still employed.

You can get a rough idea simply by subtracting how much you save from how much you earn. But you’ll get a much more accurate picture if you track every penny you spend for two to three months. That includes everything from the bills you must pay (mortgage, insurance, car payments) to those that are discretionary (dining out, an expensive bottle of wine, gifts for your kids or grandkids).

This process is often eye-opening, and sometimes downright embarrassing, when people realize where their money is going.

2. Set goals for the future and prioritize in the present.

Think about what you want your life to look like when you retire and — based on what you’re spending now — what it will cost to make that happen. Some expenses will be reduced when you stop working, but others, such as health care, will likely increase as you age. So be realistic.

If you haven’t saved enough for the lifestyle you want, you still have time to close the gap, but you may have to make some sacrifices. One example: That $5 cup of coffee you stop for every morning on the way to work is costing you more than $1,000 a year. If you’d invested $1,000 in Netflix 10 years ago, when it first launched its streaming service, it would be worth an estimated $52,000 today. Even if you’d saved it in your 401(k) or money market account, you’d benefit from the bump. It’s up to you to decide if that’s more valuable than the little perks you’re enjoying now — and you can pick and choose which should stay and which should go.

3. Come clean and work as a team.

If you’re married, it’s important to come clean with each other about the things you spend money on. I meet husbands who say the grocery bill should be $40 or $50 a week, and their wives just sit there laughing. I meet wives who have no idea how much a round of golf costs, or how much is going into the pot at the monthly poker game. Meanwhile, they’re sneaking in their shopping bags when nobody’s looking. You should be budgeting for everything, from Christmas gifts to cable packages, and it’s important to agree on your priorities.

It’s never too late to start budgeting. It’s also never too early. If you begin 10 or even 20 years out, it gives you time to recover from a slow start or an irresponsible one. Or you may find out you’re in better shape than you thought, and you don’t have to worry quite so much about your retirement future.

Kim Franke-Folstad contributed to this article.

About the Author

Michael K. Macke, CFP

Vice president and co-owner, Petros Estate and Retirement Planning

Michael Macke is vice president and co-owner of Petros Estate & Retirement Planning, a company headquartered in Jacksonville, Fla., with offices in St. Augustine and Winter Park.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022


12 Questions Retirees Often Get Wrong About Taxes in Retirement

12 Questions Retirees Often Get Wrong About Taxes in Retirement

You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?
January 21, 2022
Time to Press the Money ‘Pause Button’ after the Holidays

Time to Press the Money ‘Pause Button’ after the Holidays

If you overspent on the holidays, and spoiled your kids in the process, now’s the time to make some changes.
January 20, 2022
Why Women Need to Take a More Active Role in Their Financial Futures
Women & Money

Why Women Need to Take a More Active Role in Their Financial Futures

It’s a mistake to let someone else make all your decisions or take care of everything for you. You can start taking control of your finances by review…
January 17, 2022
How to Just Say No to Binge Spending
Smart Buying

How to Just Say No to Binge Spending

Don’t let emotions steer you into buying things you don’t need or can’t afford. Know the warning signs and follow these tips.
January 14, 2022