How to Estimate Retirement Expenses
- 1). List all of the monthly expenses you will incur every month once retired. This includes housing payments, car payments or debt payments, payments for medication and other healthcare costs, food expenses, utility bills and anything else that you must pay every month. If you plan to downsize after retirement, for example by buying a smaller house, then use those numbers on this list instead of your current numbers. Determine exactly what your new mortgage payments will be. If you aren't sure about how much your monthly food bill is, go back and look at receipts or start tracking your expenses now. It is essential to know how much you spend on the necessities every month, since this is the minimum it will cost you to maintain your standard of living after retirement.
- 2). Add the total of other required expenses. When you retire, you may have to provide your own medical insurance. If you are going on Medicare, the coverage may not be as comprehensive as your plan when you were employed, so add the additional cost of co-pays or prescriptions. If you had a company car but will now need to buy one, determine how much you plan to spend. Again, be as exact as possible in getting these numbers, doing research if you have to by contacting Medicare or your pharmacy, for example.
- 3). Add up your monthly entertainment costs. Now that you are retired, you may want to travel more or engage in some other hobbies you have long been neglecting. While it is most important to know that you have enough to cover your fixed monthly expenses, you will also want to know if you have enough to enjoy your retirement. Factor in other things that are optional but that you want to do, such as giving Christmas gifts to your grandchildren.
- 4). Add all the numbers together to determine your total monthly expenses. If this number is less than the income you can expect from Social Security, pensions and investments, then you should be in a good position to retire.
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