Calculate Retirement Expenses To Figure Out How Much You Will Need

This article in CNN Money does a good job explaining how most people try to put the cart before the horse when it comes to figuring out how much money you will need in order to retire.

As this article clearly points out, a lot of people arrive at their advisor's office, papers in hand, telling the advisor how much money they have stashed away and asking if it will be enough to retire on.

While this information is certainly important, it is equally important for an advisor to understand what your expenses will be in retirement.

Will you still be paying on a mortgage or paying rent?

Do you have a special needs adult dependent you are financially responsible for?

If you are considering early retirement, how will you cover medical expenses and/or insurance?

Do you have or expect debt like car payments or credit card debt that will need to be serviced?

Beyond normal living expenses, do you have plans such as travel or country club memberships to pay for?

The analysis that needs to be done includes both supply and demand. You need to understand the supply of funds and where the funds are coming from (savings, pension, social security, other) and the demand for money in terms of expenses. It is impossible to do a one-sided analysis.

The article linked above is an easy read and useful for someone who has typical questions. I highly recommend it.