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

Dying Careers You May Want to Steer Clear Of

Dying Careers You May Want to Steer Clear Of

It’s tough to change, but your job could depend on it. Be flexible in your career goals – and talk with your kids about their own aspirations, because…
September 13, 2021
7 Best Commodity Stocks to Play the Coming Boom

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021
5 Top Dividend Aristocrats to Beef Up Your Portfolio
dividend stocks

5 Top Dividend Aristocrats to Beef Up Your Portfolio

The 65-member Dividend Aristocrats are among the market's best sources of reliable, predictable income. But these five stand out as truly elite.
September 14, 2021


How to Calculate Your Net Worth

How to Calculate Your Net Worth

Run an inventory of your assets and liabilities to find out how much you're worth.
September 20, 2021
Yes, Your 401(k) Has Its Perks, But It’s Not the Only Way to Save
how to save money

Yes, Your 401(k) Has Its Perks, But It’s Not the Only Way to Save

Tax diversification can play a vital role in stretching your retirement savings. Here’s how to achieve the flexibility you need with a three-bucket sy…
September 20, 2021
How Exactly Do You Stress-Test Your Financial Plan?
retirement planning

How Exactly Do You Stress-Test Your Financial Plan?

Some tasks are not good for DIYers, and stress-testing your portfolio is probably one of them. Because individuals don’t have access to the same tools…
September 18, 2021
The Downside of Delaying RMDs
required minimum distributions (RMDs)

The Downside of Delaying RMDs

With the SECURE Act 2.0, Congress is contemplating raising the age for required minimum distributions. However, don't assume you would benefit from th…
September 16, 2021