Planning for retirement is one of the most significant financial milestones in life—and one of the most complex. Whether you’ve been diligently saving for years or are just beginning to think seriously about your retirement, it’s normal to feel overwhelmed by the many variables and decisions involved.
For many people, generic advice about retirement planning doesn’t quite fit their unique circumstances. If you’ve ever wondered how to tailor your retirement strategy to your wealth level, this guide is for you.
At Legacy Wealth Advisors, we’ve helped clients across a broad range of financial situations craft retirement plans that offer clarity and flexibility. Our experience has shown us that no matter your wealth level, a thoughtful and well-structured plan can help reduce stress and set you on the path to a retirement that you enjoy and a legacy you can be proud of.
Understanding Your Expenses When Retirement Planning
Retirement often brings significant changes to your spending patterns. For instance, you may want to travel more or learn a new hobby. However, you might also face increased healthcare costs or want to give more money to charities or ministries.
To simplify planning, we group retirement expenses into three categories:
1. Essential Expenses
These are the non-negotiable costs that will continue in retirement. They include:
- Everyday groceries and necessities
- Housing-related costs such as property taxes, mortgages, utilities, or rent if applicable
- Transportation, including gas and maintenance for your vehicle
- Annual taxes, which may include income taxes or property taxes
- Healthcare costs, such as insurance premiums, prescriptions and routine medical visits not covered by insurance
2. Discretionary Expenses
We often see discretionary spending increase the most when our clients retire—after all, many see retirement as the time to enjoy their hard-earned money! Discretionary spending includes:
- Travel and vacations
- Dining out and entertainment
- Gifts for family or friends
- Charitable contributions to causes you care about
- Hobbies such as golf, art classes, or gardening
Your discretionary spending will vary based on your goals for retirement—whether you want to travel more, give more generously, take on more hobbies, or a combination.
3. One-Time Expenses
Retirement can also bring unexpected costs. While these may not happen every year, they’re crucial to plan for. They include:
- Home repairs, such as a new roof or updated appliances
- Major medical expenses or long-term care costs
- Support for family members, such as adult children or grandchildren
- Replacing a vehicle
By breaking down your expenses into these categories, you can better understand how much you’ll need each month and year in retirement.
What to Consider When Planning Your Retirement Expenses
When planning for your retirement expenses, you’ll want to consider a few additional factors. Your circumstances now and in the future will impact your spending, so take some time to consider the following questions:
- Is Your Mortgage Paid Off?
If your mortgage isn’t yet paid off, you’ll need to decide whether to continue making payments or downsize to reduce your housing costs. We recommend trying to pay off your mortgage before you retire, if possible. - What Other Debt Do You Have?
You may have other debt like car payments, credit card debt, or educational debt. If these aren’t paid off by the time you retire, you will want to factor monthly payments into your budget. - What Will Healthcare Look Like?
Healthcare is often one of the largest expenses for retirees. Consider whether your insurance premiums will increase, whether you’ll need long-term care, and how to cover unexpected medical events. - What Are Your Travel and Leisure Goals?
Retirement offers the freedom to explore new hobbies and destinations. Consider how much you’ll want to travel and what hobbies you’ll want to invest in (remember, traveling and staying active in retirement improves your health and quality of life!) - Will You Have Dependents?
Determine whether you have adult children or grandchildren you need or want to support, including if you want to help family members pay for education.
Answering these questions honestly can help you form a realistic picture of your retirement needs. At Legacy Wealth Advisors, we specialize in guiding clients through this discovery process, offering insights and strategies to bring clarity to even the most complex situations.
Retiring at Different Wealth Levels: How to Prepare
Retirement planning is not one-size-fits-all. Your wealth level plays a significant role in shaping your retirement strategy. Below, we’ll explore how retirement might look at three different financial levels, along with tailored approaches for each. The scenarios below are just examples—for more specific advice, reach out to your financial advisor or schedule a complimentary call with us.
Retiring with $2 Million
A $2 million portfolio offers a strong foundation for retirement. However, if you have goals to travel or are used to a certain lifestyle, you’ll want to plan and budget carefully. Let’s break down what that might look like:
- Annual Income Potential: With a 4% withdrawal rate (a safe average many retirees use to calculate their retirement income), this portfolio can provide approximately $80,000 annually, which might fall below the annual income you’re used to. You may be able to supplement this with Social Security, a pension, or part-time work or consulting.
- Challenges: Remember that healthcare premiums and costs tend to rise after you retire. It’s also important to factor in inflation or market fluctuations that might impact your spending power.
- Sample Strategy: Allocate $50,000 for essentials like housing and healthcare, $20,000 for discretionary spending such as travel, and $10,000 to a contingency fund for unexpected costs. Again, this might be below the standard of living you’re used to in your working years, so work with your financial advisor to create an effective plan.
Legacy Wealth Advisors can help you create a monthly withdrawal plan that balances your needs with portfolio sustainability, ensuring your nest egg lasts throughout your retirement.
Retiring with $5 Million
If you are retiring with $5 million, you have a bit more breathing room for discretionary spending. Many of our clients also use a larger retirement account as an opportunity for generosity, whether that includes seeking out charities to donate to, increasing inheritance amounts, or treating your family to a special event or vacation that you can enjoy together.
- Annual Income Potential: A 4% withdrawal rate translates to $200,000 annually, which allows for significant flexibility in spending and giving.
- Challenges: Your tax burden will increase with $5 million in retirement funds. Work with your financial advisor to determine a strategy for capital gains taxes.
- Sample Strategy: Capital gains taxes are actually a great opportunity to increase your charitable giving while decreasing your tax burden. Consider a strategy including a Donor Advised Fund (DAF), which gives you flexibility in how and when you give.
Retiring with $10 Million
A $10 million portfolio comes with a higher level of financial security—and even more opportunity to preserve wealth for future generations.
- Annual Income Potential: With a 4% withdrawal rate, you could generate $400,000 annually.
- Challenges: With this amount, the focus shifts from funding your lifestyle to preserving wealth for future generations and managing estate taxes. However, you will still want to keep capital gains taxes in mind.
- Sample Strategy: Work with your financial advisor or estate planning attorney to strategize advanced estate planning techniques, such as irrevocable trusts, to minimize tax liabilities. This ensures that more of your wealth benefits your heirs and aligns with your values.
Retirees at this level often benefit from private wealth services, such as tailored investment strategies and access to specialized tax professionals, which Legacy Wealth Advisors offers.
Saving for Retirement, No Matter Your Net Worth
Regardless of your current financial standing, effective retirement planning starts with proactive saving and investing.
- Set Clear Goals: Define what retirement means to you—whether it’s travel, spending time with family, or pursuing hobbies.
- Start Early: Even small contributions to a retirement account can grow significantly over time, thanks to the power of compounding.
- Diversify Investments: A diversified portfolio helps manage risk while optimizing growth.
- Adjust Regularly: As life evolves, so should your financial plan. Regular reviews with an advisor ensure your strategy aligns with your changing goals.
Your Partner in Retirement Planning
Planning for retirement doesn’t have to be stressful. At Legacy Wealth Advisors, we’re here to guide you through every step of the process and provide more clarity for your goals and dreams.
Our holistic approach ensures that your plan isn’t just about numbers—it’s about your life, goals, and legacy. We specialize in helping clients across different wealth levels craft strategies that deliver peace of mind and long-term security.
Whether you’re just beginning your retirement journey or need advanced planning support, we’re here to help. Schedule your complimentary consultation today to build the retirement you’ve always envisioned.
Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. The information contained in this report does not purport to be a complete description of the content referred to in this material. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making a decision, and it does not constitute a recommendation.
Material prepared by Hughes Integrated, an independent third-party.
