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Transition to Retirement: Will Your Income Match or Exceed Expenses?

Category: Retirement Planning

By Bob Stacy
National Institute of Transition Planning

September 15, 2018 — I am consistently amazed when conducting my NITP “Transition to Retirement” sessions when I ask participants a very simple question: “Do you know how much you spend each year?” The answer is almost universally “no”!

Retirement income should be easier to calculate
In preparing for retirement you should know approximately what your income will be. If you are a federal or state worker or you are employed by a larger company, you can visit your HR department and have them provide an estimate of your annuity or pension, which will probably be your main source of retirement income. Then you can add other possible sources of projected income such as 401Ks, Social Security, investment income, TSPs, part-time work and maybe even inheritance. If you don’t have a pension, it will probably be slightly easier to estimate your income.

No matter how much income you may have forthcoming, no one should retire if you don’t know what you actually spend each month. Running out of money in retirement is one of the worst things that can happen to you. So I suggest that you not consider retirement until you know your annual expenses and that you start budgeting immediately.

Start Tracking
Beginning today, start tracking ALL your expenses using a spreadsheet you feel comfortable with such as EXCEL, WORD, QUICKEN or Ensure you record every expense, even down to that Starbucks cup of coffee each day. You will be amazed how a simple $5.00 coffee adds up during a full year. And that $10.00 sandwich you eat for lunch at work adds up to about $2,400 a year! So maybe it is time to give up expensive habits, i.e., going out to breakfast and lunch each work day. A simple solution is to start bringing these meals from home. It may be hard at first to break these habits — as research shows it takes 21 days to break a habit — so give yourself some time. Habits are mainly formed from laziness, not necessity.

I recommend you track all expenses for at least a year, if not two, before you retire. This will provide a good estimate to see if your projected income will cover most expenses. And don’t forget to add an ‘emergency fund’ of six months of expenses as well. If income matches or even exceeds expenditures then you should be in good shape. On the other hand, if expenses exceed income then you will need to choose one of three scenarios: cut expenses, work part or full-time, or do a little of both! Nothing is worse in retirement than discovering you are spending more than you earn. Retirement is supposed to be your “happy” years, not one of “stress and sadness.” And if you don’t have the discipline to do this yourself, consulting/hiring a financial advisor is a great idea.

I wrote in a previous NITP article that retirement involves something similar to the real estate mantra of ‘location, location, location’; it is ‘plan, plan, plan’! Ensuring you properly plan a budget by having income equal to or exceeding expenses, your prospects of having a long and happy retirement life will be fantastic!

About the author: Bob Stacy conducts periodic training sessions for federal employers about to enter retirement. As a big fan of, he contributed this article – thanks Bob. He can be reached at

Comments: Have you had experience trying to match up your expected expenses in retirement with the income you think you will get. Please share what you learned in the process in the Comments section below.

For further reading:
Topretirements Blog – Retirement Planning

Posted by Admin on September 13th, 2018


  1. How do you go about planning for replacement appliances, TV’s, major car repairs, roof replacement, furnace replacement? Should you add up the value of each item and have like $20,000 set aside for replacement? Unforeseen expenses are a budget killer. Including a car that keeps breaking down. Do you put money into and old car or do you buy a new one and how do you budget for a new car? If you have lots of money there is no worry about it but for those who are trying to stick to some kind of a budget the unknown expenses will destroy a budget. Not to mention all the copays per year on Medicare if you have a bad year and have a lot of medical expenses, that will also destroy your budget. Bringing lunch and snacks to work and cutting out Starbucks is a no brainer. How to figure out the hidden expenses down the road is the hard part.

    I used to say buying a house is the easy part and even paying the normal bills. It is all the other stuff that kills you. Buying garden tractors, weed whackers, hoes, rakes, snow blowers, leaf blowers, buying flowers, trees to plant. Resurfacing your driveway, hiring people to cut down trees that have fallen after a storm. Replacing the pump in your well if it fails, having your septic cleaned every few years. When things age: replacing your furnace, replacing your deck, replacing your roof. On and on.

    by Louise — September 14, 2018

  2. I’ve always been car rich and cash poor. During the five year countdown to retirement, we sold off collectibles, cars and motorcycles acquired over decades. I gave up several hobbies but regained my piece of mind and an emergency fund for all of the reasons you listed. We aren’t there yet but more stuff will find new homes in the 198 days until retirement.

    by Futura — September 14, 2018

  3. Good move Futura. We have been retired for 3 years. Since that time we have needed a new dryer, new dishwasher. Our brick sidewalk in front of the house has caved in due to torrential rains. We have a mason coming today to give us an estimate to fix it. The front step has a broken edge and is a bit of a hazard too that needs fixing. Then we have a small retaining wall that is made of wood and falling apart. So all this stuff will get estimates. Before we retired we put on a new roof, new deck, vinyl siding, new gutters, new front door. My Mom used to do one ‘big’ thing a year if no emergencies came about. I have sold a bunch of stuff on ebay for a rainy day fund but it is no where enough to pay for much of anything. I need a new kitchen floor soon too! Our driveway needs sealing and some attention to cracks. It never ends!

    by Louise — September 15, 2018

  4. To help us plan how much we spend each month I went to my bank statements online and looked at month by month to help guide me as to how much I spend. I took that amount and added 20,000 per year for travel which I could use for an emergency instead of traveling. I will retire when I hit that annual figure.

    by Kevin — September 19, 2018

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