Retirement expense cheatsheet for investors

It can be a daunting task to get a full picture of your retirement expenses. Use this cheatsheet as a way to prepare to complete a more comprehensive retirement expense calculator or retirement expense worksheet. That way, when you sit down to do the math, you aren’t having to get up every 30 seconds to dig through your files.

WHY BOTHER WITH A RETIREMENT EXPENSE LIST?

Understanding your expenses is an important step in retirement planning. In fact, it’s the only way you can know whether your retirement income—which may be largely generated from your investments and pensions—is enough each year to cover both your non-discretionary (required) and discretionary (optional) expenses. Once you're confident in your numbers, you can take a look at the big-picture retirement strategies needed to get you there.

THE 'RETIREMENT SMILE"

It’s important to say that retirement expenses often change as we get older. At the beginning of retirement, we may be on-the-go. This flurry of activity likely slows as we age, with a drop in related expenses, only to probably increase again in our 80s and 90s when we require more health support and personal care. This retirement spending curve is sometimes known as the “retirement smile.”

It’s a good idea to revisit your retirement expenses regularly to take into account any change in total expenses, whether that’s an increase or decrease. That way you have an up-to-date picture of your retirement income needs and can plan to address any windfall or shortfall.

BREAKING IT ALL DOWN

Most retirement expense worksheets and calculators will ask for your numbers by month. If the amount varies by month—for example, your home heating bill—take the annual amount and divide it by 12.

THE KEY EXPENSES YOU SHOULD CONSIDER IN RETIREMENT ARE:

• Accommodation
• Transportation
• Living expenses
• Insurance
• Debt repayment
• Savings allocation
• Fees
• Taxes
• Professional expenses
• Entertainment
• Hobbies
• Gifts
• Large one-time expenses (e.g. downsizing)

ASSEMBLE THIS DETAILED RETIREMENT EXPENSE INFORMATION BEFORE USING A RETIREMENT CALCULATOR:

• Mortgage payments
• Monthly rent
• Utilities (e.g. heat, electricity, water, sewer)
• Condo fees
• Property taxes
• Home repairs and renovations
• Home insurance
• Services (e.g. cleaners, pool, lawn care)
• Storage fees
• Communications (e.g. phone, cable, internet, streaming services)
• Income taxes
• Groceries
• Gas
• Vehicle loan/lease payments
• Vehicle repairs
• Vehicle insurance
• Vehicle registration
• Public transit
• Personal loans
• Credit card payments
• Life insurance
• Disability insurance
• Health insurance
• Emergency fund contributions
• Savings contributions (e.g. RRSP, TFSA, non-registered accounts)
• Financial fees (e.g. bank, advisor)
• Entertainment (e.g. restaurant meals, movies)
• Hobbies
• Travel
• Education
• Professional expenses (e.g. memberships, software, equipment)
• Subscriptions (e.g. newspaper, magazine)
• Recreation
• Personal care (e.g. toiletries, hair cuts)
• Clothing
• Medical
• Dental
• Pet costs (e.g. food, vet visits, insurance, boarding, grooming, medication)
• Gifts (regular and one-time gifts to family and friends)
• Donations

Whew. That’s an exhaustive list, so set aside some time to find the information. Then plug your numbers into a retirement expense calculator or worksheet. Once you have your total expenses, you can determine if your income will be sufficient to meet your needs. Wondering if you can afford to retire? Try our retirement calculator.