Are you wondering, "Can I retire yet?"
Or maybe you've caught yourself asking a slightly different version of the same question: "What's my magic number?"
It's the most common question we hear from people approaching retirement, and almost everyone starts in the same place. They open their 401(k) statement, check their brokerage account, and add up IRAs and maybe a pension.
This makes sense. Those numbers are easy to find. They show up neatly on statements and dashboards.
But there's another number that matters just as much. Often, it matters even more.
And no one sends you a statement for it.
That number is your monthly spending.
Why Expenses Matter More Than Your Account Balance
Most retirement planning conversations start with assets. How much have you saved? What's your investment mix? What rate of return can you expect?
Those are important questions. But they're secondary.
Retirement isn't about hitting a certain balance. It's about replacing a paycheck. The only way to know how big that paycheck needs to be is to understand your spending.
Two households can each have three million dollars saved and be in completely different situations. One might be financially independent for life. The other might be on a tight margin from day one of retirement.
The difference? Expenses.
Yet most people are surprisingly unclear about what they actually spend. Even highly successful professionals and business owners tend to underestimate this number.
That's why expenses are the number one retirement question nobody gets right.
Step 1: Figure Out Your Current Spending
The first step isn't guessing. It's measuring.
There are two practical ways to do this. Neither requires perfection. Both are far better than relying on memory.
The Top-Down Approach
The fastest way to get a usable number is simple.
Start by downloading your bank statements into a spreadsheet. Ideally, you want a full twelve months. A year smooths out vacations, holidays, and irregular purchases.
Next, subtract items that aren't spending.
Remove income deposits. Take out investment contributions. Exclude transfers between accounts, refunds, and true one-off transactions.
What remains is your actual spending.
It won't be categorized. It won't look pretty. But it will be honest.
For many people, this exercise alone is eye-opening. The final number is often higher than expected, even before any retirement lifestyle upgrades.
Flow-Based Spending Analysis
The second approach is more structured and more sustainable over time.
At Hive Retirement Planning, we use a system known as flow-based budgeting. We often implement this using tools like Monarch Money. There's an advisor version and a do-it-yourself option as well.
To be clear, this isn't about putting you on a restrictive budget. The goal is visibility, not guilt.
Flow-based spending focuses on where money actually flows and ensures your most important obligations are covered first. It naturally organizes spending into three categories:
Fixed Expenses
These are your recurring monthly bills that can be placed on autopay.
Mortgage payments, property taxes, insurance premiums, utilities, subscriptions, and similar commitments fall into this category.
For many households, fixed expenses make up 50 percent or more of monthly spending. Knowing this number gives you a sense of how much of your lifestyle is non-negotiable.
Flexible Expenses
Flexible expenses are the day-to-day decisions you make after fixed bills are paid.
Groceries, dining out, gas, entertainment, household supplies, and personal spending all live here. These expenses fluctuate week to week and month to month.
This category is important because it reflects how you live, not just what you owe.
Non-Monthly Expenses
These are the irregular but inevitable costs.
Travel, holiday gifts, vehicle purchases, home projects, and emergency reserves all fall into this bucket.
In tight years, these are often the first expenses people plan to cut. In reality, they show up more often than expected. Ignoring them leads to underestimating true spending.
Step 2: What Changes in Retirement?
Once you understand what you spend today, the next step is projecting how that number changes in retirement.
Some expenses will go away.
Retirement plan contributions disappear. Payroll taxes often drop. Commuting costs may be eliminated. In some cases, the mortgage is paid off.
These changes are real and meaningful.
But retirement also adds new expenses, and this is where many plans fall apart.
You may travel more, especially early in retirement. Hobbies expand. Dining out becomes more frequent. You might join a club, support family members, or spend more on experiences.
Healthcare costs also tend to rise over time, even for healthy retirees.
Many people assume they'll spend significantly less in retirement. Sometimes that's true. Often, it isn't.
The Retirement Spending Curve
In reality, retirement spending frequently follows a smile-shaped pattern.
In the early years, spending is higher. These are the active years when health is good and time is abundant. Later, spending may slow down as travel and activity decrease. Eventually, discretionary spending often declines, but healthcare and support costs increase.
Planning only for an average year misses this dynamic. Good planning anticipates it.
Step 3: Account for Non-Portfolio Income
Not every retirement dollar needs to come from your investments.
This is an important and often overlooked part of the equation.
The most common source of non-portfolio income is Social Security. The decision of when to claim benefits can have a major impact on your retirement cash flow.
Claiming at 62, full retirement age, or 70 each comes with trade-offs. The right choice depends on health, longevity expectations, marital status, and the rest of your financial picture.
Beyond Social Security, you may have a pension. Rental income may continue into retirement. Some people choose to work part-time in a role they enjoy.
Even modest income streams can meaningfully reduce pressure on your portfolio, especially in the early years of retirement.
The key is timing. Not all income starts on day one. Your plan needs to reflect when each source begins.
Step 4: Calculate Your Burn Rate
This is where everything comes together.
Your burn rate is the amount you need to withdraw from your portfolio each year to support your lifestyle.
To calculate it, start with your expected retirement expenses. Then subtract reliable non-portfolio income.
Be careful to align timing. If Social Security starts at age 70, it doesn't help fund spending at age 62. Early retirement years often rely more heavily on savings.
Once you know your burn rate, the big retirement questions become answerable:
- Do you have enough?
- When can you retire?
- How long will your money last?
Without this number, projections are guesses. With it, they become plans.
What We See Over and Over Again
After working with many households approaching retirement, a few patterns are consistent.
Most people underestimate their expenses. This is true even for financially sophisticated individuals.
One-off costs happen far more often than we like to admit. They're not truly one-off.
And clarity around expenses creates confidence. When you know your numbers, decisions feel calmer and more intentional.
That's why we place so much emphasis on this step.
Figure Out Your Spending Number
Before you focus on your account balances, make sure you understand your spending.
Know what you spend today. Think carefully about what will change in retirement. Identify income sources that will help cover those expenses. Then calculate the gap your portfolio needs to fill.
That's the foundation of a sustainable retirement plan.
We offer a downloadable spreadsheet on HiveRetirement.com that helps you categorize expenses and get clarity around your spending. It's one of several tools, flowcharts, and checklists designed to help you navigate your retirement journey with more confidence.
If you'd like help connecting the dots—from spending analysis to Social Security decisions and withdrawal strategies—we'd be happy to help you build a retirement plan designed for peace of mind.
Expenses may not be the most exciting part of retirement planning. But they're the part that makes everything else work.