Realistically Determining how much You’ll Spend in Retirement

We just marked our 15th anniversary of my retirement day. We’ve not only lived with realistic spending goals (in our non-humble opinion), but actually have a larger financial nest egg today than we had when I said goodbye to my job at age 65.5. We’re certainly not even close to being millionaires, but by careful planning and budgeting, we’ve lived full retirement lives without denying ourselves anything.

Immediately after my retirement, we sold our home in the cold, cold East and moved to the hot, hot Southwest, and bought a comfortable desert home. We cruised, flew and hiked throughout the world. We worked for pay in our new city until our last child was graduated from college. Since then, we’ve kept very active as volunteers, and have performed so well, we’ve earned several community service awards.

My spouse and I are children of the Great Depression. We witnessed first hand our parents’ struggle through those terrible years, and we were determined not to get caught in the same financial trap in our later years. It wasn’t easy to save for retirement through our own working years, and we didn’t deny our kids anything. But, by careful planning, we put together investments and plans that have given us our current retirement security.

Determining how much retirees should spend depends, of course, on how much you have in that nest egg. With us, as with many oldsters, we diversified our plans for our retirement years. The basic funding today comes from our Social Security benefits, which pay for most of our basic needs. We have company pensions, which we use for traveling and other recreation spending.

Beyond those resources, when we want to splurge a bit, we dip into our investments. However, we’ve been able to make sure the annual growth of our investments is always larger than whatever we dipped out for that extra spending.

We’re happy and grateful for being in our current secure financial state. We could afford to dig deeper into our nest egg to buy a larger house, drive super SUVs instead of subcompact sedans, take more luxurious trips and cruises, load up on posh clothing and dine daily at the snootiest restaurants. But, we don’t feel the need to do any of those things.

Is our conservative spending because those painful Great Depression memories lurk in our minds? I’m sure that has some influence, but our frugality is mostly just a personal philosophy we’ve practiced all our lives. We have kept our retirement spending under control simply because we don’t spend more than what our annual income brings in.