How Much Will You Spend in Retirement?

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How much will you spend in retirement?

If you want to reach Financial Independence and be able to retire, you need to know how much you are going to spend while retired. If you are retiring next year, it is really easy to know how much you are going to spend. However, if you are going to retire in a long time, it is not trivial to estimate how much you will spend in retirement.

I have already talked about the different ways tor each Financial Independence (FI). Regardless of which way you choose to reach FI, you will need an accurate estimation of your retirement expenses. Without this, you will not be able to know how much of the road remains.

You could think that you are going to spend exactly the same as you spend now. But this is quite wrong. You need to take into account many things. You will normally pay fewer taxes. But your health expenses are likely to increase. And inflation will increase your expenses significantly over the years.

In this post, I am going to cover the main points that will impact your retirement spending. It is not a surefire way to estimate how much you will spend in retirement. But it will definitely help if you want an accurate estimation.


I think that taxes will be the item that will change the most after retirement. This will highly depend based on where you live.

The income taxes will very likely go down a lot since your main income will go to zero. If you have more income from a side hustle, you may still have to pay taxes on it. It will depend if you intend to continue on your side hustles.

If you have to pay capital taxes, this will not change in retirement. So you need to take into account the full amount of your capital taxes. But if you are retiring in a long time, you will have a higher net worth by the time you retire. And as such, your capital taxes will increase by the time of your retirement.

Now that you are in retirement, you will have to get money from your net worth. There are two means for that. Either you get dividends from your portfolio or your sell some shares. If you get dividends, you may have to pay taxes on dividends. If you rely on capital gains, you may have to pay taxes on capital gains.

As you can see, this is not a simple matter. It is difficult to estimate how much taxes you are going to pay after retirement. But this is important. For instance, in Switzerland, we pay both income taxes and capital taxes. And dividends are taxed as income here. However, we do not pay capital gain taxes. I expect my taxes to go down significantly when I go into retirement. However, they are going to go up from now to the day I retire because of our increasing net worth. But I still expect fewer taxes than today when I retire. I would say that I will pay around 50% fewer taxes than now.


Health costs are generally going up as you get older. You are going to pay more in health insurances and more for doctors in general. This is something very important to consider. You do not want to go cheap on your health.

Personally, I expect at least a 50% increase in health costs by the time I retire. Moreover, since my current company pays my insurance, this is something more that I will have to pay by retirement if I am still with the same company.


My future retirement house!
My future retirement house!

Housing expenses will likely change by the time you retire. If you are owning your house, you may continue to amortize your house and as such your interests will go down every year. If your interest rate is fixed, you are safe from rate increase. But if your interest rate is variable, it is more difficult to estimate the interests on your mortgage. You should also consider fixed costs for your house and maintenance. These are likely to increase over time.

On the other hand, if you rent, it is more likely that the rent will go up. Generally, rent prices are increasing over time. You may be lucky and your rent may go down. But you should not count on that. Finally, you need also to consider the case where you buy a house in the years between now and retirement. In that case, you have to completely change your estimate.

There is also one special case to consider. If you have kids now living in your home, you may not have kids at home anymore when you retire. That means that you probably do not need a big house or apartment anymore. So that means you can actually reduce your expenses.


Homemade chocolate chip cookies
Homemade chocolate chip cookies

Generally, your food budget will not change in retirement. However, there is one thing you may want to consider. The number of people who eat your food may change. If you have children now, they may leave the house before you retire. But if you plan to have children, you may retire with children at home. In which case, your food budget will actually increase.

Some people are also going to eat out more after retirement. There are just more occasions to eat out. On the other hand, you will likely be at home for your lunches instead of being at work. That will make a difference as well. You need to consider both things in your estimations.

No more work

Not having to go to work every day may make some differences for your budget. For instance, it is likely that you will have to spend less on commuting. For some people, it also means you will not have to spend money on some nice clothing.

On the other hand, you may lose some benefits from working at your current company. For instance, my company pays for my health insurance. This will make a very large difference once I retire. Moreover, I also have free coffee and some money for my lunches at work. This may not sound a lot but this will definitely impact your spending.

Retirement Benefits

On the plus side, you may enjoy some retirement benefits in your country. In Switzerland, several things are cheaper once you reach retirement age. Moreover, you can also get the money from your three pillars once you retire. The money from your second and third pillar should already be accounted for in your net worth. However, the pension from your first pillar may help you with some nice passive income. But, something is very important. In most countries, you will not be able to get retirement benefits until you reach official age. For instance, in Switzerland, that means you will not be able to get your benefits until the age of 65 for men and 64 for women.

More time – New hobbies

There is one thing that people do not really take into account for retirement. You will have plenty of time on your hand. That means you are going to do something during that time.

Some people are going to travel more and go more outside. That means they will have to pay extra money for their time. This is not a bad thing of course. But this is something you need to take into account. For most people, their entertainment budget will increase in retirement.

If you only have frugal hobbies, it should not be a big deal. You will be able to enjoy your hobbies with a lot more time and not spend a lot more money than now for these hobbies.

This may sound counter-intuitive, but having more time may end up costing you more. Most people will not think of this when estimating their retirement expenses. But this is important!


Something very important you really need to take into account is inflation. Every year, the average price for consumers is increasing. Inflation is the rate at which the prices are increasing. It can actually be negative in which cases the prices are decreasing. But over the long-term, it is going up. Even though you may spend 20’000 dollars per year today, it could significantly increase due to inflation.

Now, nobody can predict inflation over a long period of time in the future. So you need to estimate the inflation per year. You can take the average inflation over the last 10 years as a benchmark. For instance, this would give you around 1.6% per year for the United States. For Switzerland, it was actually negative in the last 10 years, with an average of -0.38% per year.

You should be a bit conservative with your estimates. It is possible that inflation will go up in the future. In which case, it is better to count on a bit more inflation than average. For the United States, I would count at least 2% inflation per year. And for Switzerland, I would count at least 1% per year.

And do not forget that inflation also compounds! 10 year at 2% is not a 20% increase! It is 21.89%. You need to take the inflation rate at the power of the number of years of retirement. Let’s take a few examples with 20’000 dollars of base expenses:

  • In 10 years at 1% inflation per year, you will spend 22092 dollars
  • In 20 years at 1% inflation per year, you will spend 24403 dollars
  • In 10 years at 2% inflation, you will spend 24379 dollars
  • In 20 years at 2% inflation, you will spend 29718 dollars

As you can see, the impact of inflation on your retirement expenses is far from being negligible. This is something you need to take into account!


Estimating how much you will spend in retirement is something really important if you want to retire early. You need to know how much you are going to spend if you want to have enough money to cover your expenses. Whether you are going to cover your expenses by passive income or by capital gains, you need to know when you are financially Independent.

However, estimating your retirement expenses is not very easy. You need to take many things into account. You need to update your estimate every year. Your estimation will become more and more accurate as you are getting close to retirement.

If you want to be safe, you may want to increase a bit your estimated retirement expenses. This will depend on your risk aversion and on your confidence in your estimation.

Now that you know how much you will spend in retirement, you can easily calculate your Financial Independence (FI) Number.

How do you estimate your retirement expenses? Have you ever done this exercise?

About the author

Mr. The Poor Swiss

Mr. The Poor Swiss is the main author behind In 2017, he realized that he was spending more and more every year, falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2018, he saved more than 40% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

6 thoughts on “How Much Will You Spend in Retirement?”

  1. Yes, I have done this calculation, using Excel for the next 45 years [I have 54 years]. For each month, total income, and total consumption. Total income is from dividends taxed, a chunk from capital [to deplete it], state pension indexed with CPI inflation [2%-3%] (for each country). Then taxed in residence country [destination]. For consumption, each category indexed appropriately – electricity by 5%, food + travel by 4%, discretionary by 2% etc. [Country (which one?) CPI/inflation will not be my personal inflation!]. You can choose our own %. The NPV (net present value) of total consumption is a curve, with “U” shape, minimum at near 70-75 years old, then the cost increases, as medical bills can rise AND life expectancy decrease [so I will burn the money faster]. In real terms, consumption is increased approx 1%-2% every 5 years, as getting older will change my wiling to travel or need for food.

    1. Hi John,

      Wow, you really did it thoroughly. I did not do anything so thorough yet. Because I am too far from retirement. I am planning to improve my estimated spending over time. It has only been a bit more than one year since I started the improvement of my finances. I plan to update my retirement spending estimation every year to get closer to what I will really spend.

      Thanks for sharing your technique!

  2. As Swiss, an obvious idea is to retire abroad.
    Portugal, Spain, Asia all come to mind. While it may be difficult from a social life perspective, it would be a big change in purchasing power for anyone living in Switzerland.

    1. Hi Nick,

      Yes, if you are Swiss, you can more easily retire abroad. Our spending power is much more in other countries than it is in Switzerland.
      Personally, I do not want to do that, but it is a good option for most people.

      Thanks for stopping by:)

  3. It is impossible to give perfectly accurate information. It can be different from different countries. The cost of living in each country is different. It is known by all that as the age increases, the cost of travel and the cost of medicine increases day by day. In that case, he should have double the cost of his money based on his own country. In this case, a suitable plan is to be made and it’s very important before retirement. That’s all.

    1. Hi Millionaire Mob,

      I completely agree that it is impossible to make a perfect estimation. It must remain an estimation in the end.

      As you say, there is a lot of difference between countries. You have to estimate the cost for the place you want to retire. There is no global strategy to compute this.

      Thanks for stopping by :)

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