This week, I’m talking about the What To Do Before You Retire In 2021. 

Today’s must-do checklist item you’ll need to tick off before retirement is setting your retirement spending budget. 

Many people I work with - even people who are good savers and make smart decisions with their money - don’t have a clue where their money goes every month. 

If you can’t tell me how much you spend on groceries, eating out, travel, and for all of the various subscriptions you have - then you’re playing with fire when it comes to your retirement. 

For most of you, your income will be less in retirement, so it’s critical that you understand your spending and where you’ll likely cut back, and where your spending might increase. 

The purpose here is to establish a realistic budget and understand how much you spend on a monthly and annual basis and how much you will need to support and maintain the lifestyle you desire in retirement. 

Too many people don’t do this, and the result is either spending down of your assets because your assets can’t sustain your income needs - this will potentially leave you penniless sooner than you realize. Or, you get to retirement and you realize that you can’t afford to do any of the things that you envisioned.

So setting your retirement spending budget comes first. And should be done well in advance of your retirement - ideally 1-2 years out. If you are starting from scratch here, start by tracking your spending over a 3-6 month time frame. Then you’ll want to determine which spending categories will shift in retirement (maybe you’ll spend more on healthcare and travel and less on gas and clothes). Once you know your numbers, you can use these numbers as a baseline for answering one very important question: 

How much will you spend in year 1 of retirement?

Don’t worry yet about how you’re going to cover your spending - we’ll talk about that tomorrow. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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