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How Much Will You Actually Spend in Retirement?

One of the most prevalent concerns among soon-to-be retirees is: “Will my savings suffice in retirement?” This is a focal question for us as financial planners at Accardi Financial Group.

The 4% Rule and Its Limitations

A widely cited guideline in retirement planning is the “4 percent rule”. The principle suggests that withdrawing 4% annually, adjusted for inflation, from your portfolio could last 30 years. However, this rule, more of a guideline, is inherently flawed, yet it influences numerous online retirement calculators. These calculators generally propose: “Determine your total savings, withdraw 4% yearly, and slightly increase for inflation.”

Does Retirement Spending Follow a Fixed Pattern?

The conventional wisdom suggests a uniform spending pattern throughout retirement. But, based on our research and experience, this isn’t accurate. Retirement spending isn’t linear. Your financial habits and needs will evolve, and understanding this is crucial. Recognizing these spending shifts could reveal you’re closer to your retirement goal than presumed.

Actual Spending Trends in Retirement

Data from the Bureau of Labor Statistics indicates:

  • Households under 55 spend approximately $58,000 annually.
  • Post 55, a slight surge in expenditure is noted, likely due to early retiree activities.
  • Beyond 65, a noticeable decline in spending emerges.
  • While housing and healthcare costs might remain stable or increase, expenses in areas like entertainment, clothing, and transportation see sharp reductions, especially among retirees with $1 million to $3 million in assets.

In essence, the wealthier you are, the more your spending seems to decrease.

This data suggests you might need less for retirement than conventional calculators estimate. With strategic planning and a keen eye on your unique situation, early and enjoyable retirement might be more attainable than you think.

Plan Your Future with Accardi Financial Group

At Accardi Financial Group, we guide clients through these intricate financial decisions daily. How can we assist you in redefining your retirement? Reach out to us!

Important Information:

The information provided should not be considered specific tax, legal, or investment advice and is not specific to any individual’s personal circumstances. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. 

You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed. 

No client or prospective client should assume that this information, or any component thereof, serves as the receipt of, or a substitute for, personalized advice from Accardi Financial Group or from any other investment professional. 

This material was prepared by Lucia Capital Group.

Damon Accardi is a registered representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. The investment professionals are affiliated with LPL Financial and are conducting business using the respective names Lucia Capital Group and Accardi Financial Group which are separate entities from LPL Financial. LPL ART-504247 (11/23)