More, More, More!

Bill Parrott |

Retirement is a joyous occasion and a time for celebration.  After years of toil you’ve earned the right to enjoy the fruits of your labor.  You can travel the world, run on an uninhabited beach, read lengthy novels, watch movies, or volunteer your time.  Regardless of your goals it will take money to finance your dreams. 

A person retiring today at age 65 may spend 35 years in retirement. How much money will she need to fund this stage of her life?  The answer is more, as in more than you think.  With a few key inputs like expenses or income it’s possible to calculate how much money she’ll need to fund her current lifestyle.  For example, if her annual expenses are $100,000 per year, then she’ll need at least $2.5 million.

As you approach retirement, if not sooner, I recommend calculating your annual expenses, so you can determine the amount of assets you’ll need to support your lifestyle.  A budget worksheet can help you determine your monthly and annual expenses.  Here’s a link to a budget worksheet:

If the inputs are known, why should we plan for more income?   Two reasons: inflation and unexpected expenses.  Inflation has averaged 3% since 1926.  The value of a dollar in 1926 is worth 7 cents today.  Inflation will annihilate your cash and bond investments over time by reducing their purchasing power. However, you can offset this decline by owning stocks. Stocks have generated a real-return (net of inflation) of 6.8% since 1802.[1]  Stocks will allow you to maintain your purchasing power in retirement.

The second reason you’ll need more money is because of unexpected expenses like a new roof, air-conditioning unit, or car.  In addition, the odds of incurring medical expenses increase as you age, unfortunately. Unexpected expenses can also come from benevolent decisions like charitable donations or gifts to loved ones. 

How can you insulate yourself so you can enjoy a fruitful retirement? Here are a few ideas and suggestions.

1.       Save more.  The more money you save today, the more you’ll have tomorrow.  Saving an extra $500 per month will put an additional $260,000 in your pocket over twenty years.

2.       Reduce your expenses. After reviewing your expenses are there items in your budget you can reduce or eliminate?  Lowering your expenses will give you some margin in retirement if you’re confronted with unexpected expenses.

3.       Pay off debt.  Reduced your debt obligations before you enter retirement.  This will lower your expenses and increase your cash flow at a time when you need it most.  If you have money in the bank, use it to pay off your debt obligations.

4.       Create a new expense category.  If you follow a budget, create a line item for unexpected expenses.  I’ve added a “black swan” category on my spread sheet for items out of my control.  Why a black swan? A black swan is a rare, and often unexpected, sight. The amount of this category should be 1% to 2% of your total expenses.  For example, if your expenses are $100,000 per year, then 1% to 2% of this amount is $1,000 to $2,000.  This figure is now part of your budget and will help you deal with unexpected expenses.

5.       Defer Social Security.  You’ll be eligible to receive Social Security at age 62, but for every year you defer your benefit, you’ll get an 8% raise.  A monthly benefit of $1,500 at 62 could rise to $2,776 at 70, an increase of 85%. 

Retirement is a wonderful time, I’m told, which probably is the reason it’s called the Golden Years.  A proper retirement plan can help keep your golden years free of tarnish!

The question isn’t at what age I want to retire, it’s at what income. ~ George Foreman

In all toil there is profit, but mere talk tends only to poverty. ~ Proverbs 14:23

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit


Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog and investments aren’t guaranteed. 




[1] Stocks for the Long Run, Jeremy Siegel, updated.