Planning for retirement is a complex endeavor that requires careful consideration of various factors. Among the myriad of questions that arise, one critical aspect is understanding your expected annual retirement spending.Let’s look into the expected annual retirement spending of Americans, using data from Personal Capital's retirement planning tool, shedding light on the diverse range of spending habits and providing insights into the chances of retirement success.

The Range of Retirement Spending

To comprehend the landscape of expected annual retirement spending, we turn to anonymized data from users of Personal Capital’s retirement planning tool. It's important to note that these users actively engage in financial planning and boast a median net worth significantly higher than the U.S. population's overall median net worth of $122,000. The table below outlines the range of expected annual retirement spending and the percentage of people within each bracket:

Users in this dataset include both single individuals and those in relationships, with the expected retirement spending representing the household's annual expenditure. Notably, the most frequently cited expected spending amount is $60,000, closely aligned with the average annual credit card spending in the U.S. This suggests that individuals may be using their current financial commitments as a gauge for future retirement spending.

Median spending, standing at $70,000, represents the middle value when spending is ordered from lowest to highest. However, the average spending is notably higher at $100,000, influenced by a few individuals projecting substantial annual expenditures, exceeding $300,000. Given the higher net worth of Personal Capital users, these larger spending expectations are not entirely surprising.

Comparing this data to the general population, where Americans aged 65 and older spend an average of $48,000 per year, highlights the contrast in retirement spending expectations.

Chances of Retirement Success

After estimating expected retirement spending, individuals often ponder whether their savings align with their financial goals. An analysis of Personal Capital retirement planner users reveals a breakdown of people's chances of success in meeting their retirement spending goals:

• More than half of people have an 80% or better chance of meeting their retirement spending goals, indicating sufficient financial assets and regular contributions.

• Unfortunately, one in five people has a less than 50% chance of meeting their goals, suggesting potential financial challenges in retirement.

These statistics become more alarming when extrapolated to the broader U.S. population. Only 50% of Americans have a retirement account, and the Center for Retirement Research at Boston College estimates that half of today’s workers are unprepared for retirement.

Setting Your Own Retirement Spending Goals

While understanding the retirement spending goals of others provides a starting point, it's crucial to tailor your annual retirement spending estimates to your unique circumstances. Financial planners often recommend planning for 70-80% of your pre-retirement income in retirement, accounting for reduced expenses such as commuting and childcare costs. However, individual circumstances may vary, and expenses could be higher if you still have a mortgage, unforeseen medical expenses, or if you plan to indulge in activities like extensive travel during retirement.

In conclusion, planning for retirement requires a realistic assessment of expected annual spending, considering individual circumstances and financial goals. The data presented from Personal Capital's retirement planning tool sheds light on the diverse range of retirement spending expectations among proactive financial planners. While more than half of individuals seem well-positioned for retirement success, the broader population faces significant challenges in adequately preparing for their retirement years. This highlights the importance of early and thoughtful retirement planning to ensure financial security and peace of mind in the later stages of life.

Best regards,

Sharon Ben-David

Your Safe Money Lady™

Protecting Your Nest Egg, Inc.

Phone: (954) 261-5200