The most reliable way to estimate what you'll spend in retirement is to go line by line, starting from what you spend now. In the example below, that comes to $3,983 a month, or about $47,800 a year.
The usual shortcut is a percentage, like planning on 70% or 80% of your income. That's hard to use when your income changes every year and a good part of it goes back into your business.
So here are thirteen lines to fill in, the five most people forget, and the costs that disappear when you stop working.
What you spend now is the best evidence for what you'll spend later. Example data.
The short version
Build your figure from your own spending, not from a percentage of income.
A paid-off home still costs money every month.
Health costs don't stop at the Medicare premium.
Tax on withdrawals is a line in the budget too.
Some costs really do go away, and it's worth naming them.
The thirteen lines
Line | Monthly, in this example |
|---|---|
1. Housing: property tax, insurance, upkeep or rent | $650 |
2. Utilities | $320 |
3. Food | $600 |
4. Transport: fuel, insurance, repairs | $380 |
5. Medicare Part B premium | $203 |
6. Supplemental and drug coverage | $250 |
7. Out-of-pocket health, dental and vision | $150 |
8. Phone and internet | $130 |
9. Travel and leisure | $400 |
10. Gifts and family | $150 |
11. Home repairs, set aside | $250 |
12. Tax on withdrawals | $300 |
13. Personal and everything else | $200 |
Total | $3,983 |
These figures are an example for a homeowner with no mortgage. Yours will be different on almost every line, which is exactly why it's worth doing. The Part B premium is the 2026 standard amount, rounded.
The five lines people forget
Upkeep on a paid-off home. No mortgage doesn't mean no housing costs. Property tax, insurance and repairs continue, and they go up over time.
Health costs beyond the premium. Medicare generally leaves you paying a share of most services, and it doesn't cover most dental or vision care.
Tax on withdrawals. Money from a traditional retirement account is taxed as income when you take it out. If you need $3,700 to spend, you may need to withdraw more than that.
Replacing a car. It's not monthly, but it's not optional either. A new car every ten years adds up to a real yearly amount.
Helping family. Adult children, grandchildren and aging parents show up in real budgets, and rarely in planned ones.
What goes away
Cost while you're working | In retirement |
|---|---|
Saving for retirement | Stops. You're now drawing money out, not adding it. |
Self-employment tax | Stops when your business profit stops |
Business costs you paid personally | Phone, mileage, software and work clothes go away |
A mortgage payment | Gone, if it's paid off by then |
This is why a business owner's retirement spending can be quite a bit lower than what she spends today. A big share of what leaves her account now is tax, saving and the cost of running the business.
How to fill in your own
Pull your last three months of personal spending, sorted by category.
Average each line. Three months smooths out one unusual month.
Cross out what stops: retirement saving, work costs, and the mortgage if it'll be paid off.
Add what starts: Medicare premiums, higher health costs, and more travel if that's the plan.
Add the five forgotten lines.
It takes about an hour, once, and you end up with a figure that's truly yours. It won't be exact, but it'll be far better than a percentage.
One yearly figure is the starting point for everything else. Example data.
Early and later retirement look different
Retirement spending is rarely flat. Many people spend more on travel and activities in the first ten years, and more on health in the later ones.
Line | Ages 65 to 75 | Ages 75 and over |
|---|---|---|
Travel and leisure | Higher | Lower |
Health | Lower | Higher |
Home | Repairs | Repairs, and possibly help at home |
Transport | Higher | Lower |
You don't need two separate budgets. It's enough to know that the travel line won't last forever and the health line will grow, so they partly balance each other out.
From a monthly figure to a savings target
Once you have your total, three more lines turn it into something you can measure against what you own.
Line | Per year |
|---|---|
Spending, at $3,983 a month | $47,796 |
Social Security at 67, at $1,900 a month | $22,800 |
The gap her savings must cover | $24,996 |
Savings needed, using the 4% guideline | about $625,000 |
That last figure uses the guideline from our post on the 4% rule, which is an estimate, not a promise. In the free Net Worth Tracker, she sets it beside her retirement accounts and investments to see how far along she is.
Three common mistakes
Using a percentage of income. It tells you nothing about what your life actually costs.
Assuming the house is free. This is the line that surprises people most.
Leaving out tax. Withdrawals from traditional accounts count as income.
See how far along you are, free
La Soglia, the free membership of the Money Mastery System, holds your savings, your home, your business and your debts in one place, with no bank connection and no card. For the three months of spending by category that this estimate starts from, the paid membership sorts your transactions for you.
Bring it to the Collective
Which line would be hardest for you to estimate? Ask how other members worked theirs out in the Money Mastery Collective. The discussion feed is open on the free membership.
Questions we hear
How much will I spend in retirement?
Estimate it line by line from what you spend now, removing costs that stop and adding health costs, home upkeep and tax on withdrawals.
Is the 80% rule for retirement accurate?
It's a rough shortcut. If you're self-employed and your income includes business costs, tax and saving, a line-by-line estimate is much more useful.
Do I still have housing costs with a paid-off home?
Yes. Property tax, insurance and repairs continue, and they tend to rise over time.
Are retirement withdrawals taxed?
Withdrawals from traditional retirement accounts are generally taxed as income. Qualified Roth withdrawals aren't.
References
The Medicare Part B premium is the 2026 standard amount from the Centers for Medicare and Medicaid Services, 2026 Medicare Parts A & B Premiums and Deductibles. Every other figure is our own worked example.
Start free with La Soglia
La Soglia is the free membership of the Money Mastery System. It gives you the Net Worth Tracker, where everything you own and everything you owe sits in one place, and the Money Mastery Collective. There is no card to enter and no bank connection.
Keep in touch
Donna shares a short version of posts like this one on Instagram and LinkedIn. Follow along there, or find everything in one place on our links page.
A note on what this is
This article is educational. The Money Mastery System is an educational tool, not financial software, and nothing here is legal, tax, investment or financial advice. The budget is an illustration, and your own costs will depend on where and how you live, your health and your tax position. For guidance on your own circumstances, please speak with a qualified professional who knows them.
