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How much can you afford to spend after Retirement?

How much can you afford to spend after Retirement?
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After working for decades, you finally reach retirement. You have managed to build a good retirement corpus. It’s time to spend!

But how much can you afford?

Spending too much can leave you with a deficit later and spending too less might make you feel like you aren’t truly enjoying your retirement. There are many thumb rules in market when it comes to spending after retirement.

A well-planned approach towards spending is needed to keep your spending rate in control.

Estimate the number of years you want to plan for:

Nobody knows exactly how long they might live but, you need to get a rough idea based on your health and family history. A realistic approach can help you plan effectively so that you enjoy your savings and make them last.

Re-plan your financial portfolio:

Saving for retirement needs a different approach as compared to spending from the corpus. Investments can be shuffled around between stocks and bonds to help you have a balanced portfolio. This is individual-specific and should be done with caution, keeping risk in mind. A financial advisor should ideally be consulted before re-planning your retirement corpus.

Assume the worst-case scenario:

Talk to a financial advisor and take the worst scenario into account before deciding on the withdrawal pattern and amounts. In case your retirement corpus is invested in stocks, then this assessment is necessary to understand the risk exposure.

It is a general assumption that overall expenses reduce in retirement. However, some expenses like electricity bill increase due to increased usage. Also, there are different ways in which retirees like to spend their golden years, like:

  • Leisure
  • Entertainment
  • Travel
  • Hobby Class
  • Visiting family

Every individual has a unique plan after retirement and you need to assess your plan. Try and list down your daily, weekly, monthly and yearly activities and plan your expenses accordingly.  A financial advisor will be able to help you factor in the inflation rates of commodities and services relevant to you to help you make informed decisions.

Despite all the planning, you need to be flexible and willing to change your spending in case the market behaves unnaturally (good or bad). Unplanned events in the family (death, birth) could also throw your spending plan off-balance. A constant reviewing approach would help you manage all these changes effectively.

In a nutshell, there is no fixed formula to calculate how much you can spend after retirement. This is an equally challenging phase of life and needs to be handled with care and caution. With the assistance of a financial advisor, you can devise a plan and guidelines for expenditure. However, the window to adapt should always be kept open. It is advisable to steer clear of all the unnecessary calculations and enjoy the retirement years.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Plan Now