Retirement Planning, Expenses, and Withdrawal Rates

I read many retirement planning blogs.  Some of them are really, really good and have useful information.  Some of these are also very technical in nature and seem to be written for actuaries or statisticians.  Much of the focus over the years has been on the correct withdrawal rate that people should use so their money doesn’t run out during their lifetime, which is a bummer.  From what I can tell, most of the commentary seems to apply to people that have quite a bit of money, or the “high net worth individual” – not necessarily for people that have between, say $100,000 and $750,000 in retirement assets.  I would call these “regular” people.  Or, “low net worth” individuals.

So here is what I say – If you are in the middle class, or lower middle class, or the class below that, otherwise known as the lower class, spend just as much time as you can in figuring out your expenses and your budget.  Try and get that under control.  What matters most when it comes to your future may not be trying to figure out the right amount to take out but also figuring out the right amount you need!  Obviously the two are tied together, But don’t get so focused on your investments that you lose track of what you have control over, which is what you save and what you spend.

When I do retirement plans for my clients, and I do a lot of them, this is such an important factor.  In my view it is the most important factor (unless you’ve got $10,000,000, and none of my clients do).  Targeting a number you can live off, your annual budget, is critical to knowing if you can retire when you want and do the things you want.  You can figure out the rest of it once you know your budget.