How Much Money Can You Spend In Retirement?

J.D. Roth, of Get Rich Slowly, calculated a neat way to figure out how much cash a retiree can safely spend while in retirement, so that their money will last as long as they do.

Here’s J.D.’s advice:

  1. Determine your current annual spending. If, like me, your spending fluctuates from year to year, calculate a three or five-year average spend. Call this number your current annual spending.
  2. Determine your safe spending level. You can use whatever method you’d like for this, but for simplicity’s sake, I’d say use the afore-mentioned four-percent rule. Take your entire net worth and multiply this by four percent. If your net worth is $1,000,000, for instance, you’d get a result of $40,000. (If you’re risk averse, either leave home equity out of the equation or multiply your net worth by three percent.) This number is your safe annual spending.
  3. Compare the numbers. Find the difference between your current annual spending and your safe annual spending. If your current spending is greater than your safe spending, you should probably cut back. But if it your current spending is less than your safe spending, give yourself permission to spend more — if you want.

Here are my answers:

  1. Right now, I am spending approximately $2,794 a month, which equals to about $33,528 a year. Please note: ALL this money is passive and is a combination of Social Security, Pension and Interest on investments.
  2. My entire Net Worth right now is about $650,000. If I wanted to gamble it all and follow the 4% rule, I could safely spend about $26,000 a year. If I did not want to risk my equity, I would follow the 3% rule and my safe annual spending would be about $19,500.
  3. If I compare both calculations against what I am currently spending, it looks like I am spending way too much money in both categories. That’s only if I were spending my own cash in retirement, which I am most definitely NOT! All my income right now is from passive sources, which means I very rarely, if ever, have to touch my capital or my home equity. Barring any great disease or calamity, my Net Worth money should live on and on. Which, BTW, we all know will NEVER happen. Something always comes up!

J.D. Roth’s advice to his readers is to always spend less. Live below your means. While that may sound nice to the human ear, in reality, a person can only live below their means if they are making more money than what they need. For me, since I never earned more than $28,000 a year in my working years, and hubby never earned more than $56,000 in his working years, we both basically lived at our means. Granted, yes, we did squirrel away bits of money here and there in retirement investments (401K) but DH was constantly losing his jobs, through either downsizing, his employers simply went out of business or they relocated. We were always tapping into our retirement accounts to make ends meet. I think a lot of people can identify with that!

Our passive income is infinite. There is no end to it. What DH and I have done in our retirements, is what we have always done: we look at the guaranteed income that is coming in to our lives and we set up our lives to meet the challenge. We’re living and spending about $33,528 a year because that’s the guaranteed amount we can safely expect. We’ve prioritized first what is important to us: housing, food, utilities, vehicles etc. and we make our lives fit into the mold. Once we finalize and set up our necessities, we calculate what money is left over and we utilize that cash towards extras. For us right now, RV travel is an extra. We plan our trips against the available funds we have readily on hand. If we can’t afford it, we don’t go OR we find an alternative destination. Currently, a trip to Rome or Paris is out of the question but thanks to our RV, we can spend three months in Arizona this winter.

I watch our cash flow daily. I stick to our budget every day. Before we leave the house in the morning, I know exactly how much money we can spend that day. Sometimes, we have to wait weeks, even months before we can spend any money on a specific item. Naturally, of course, if it’s an emergency, we have our savings accounts BUT I make it a top priority of mine never to tap into them. That’s NOT a habit I would like to make.

screen repairToday, this morning, DH is working on repairing our 17 year old sliding glass door screen. It costs $120 to buy a new one. Or, for $15, he bought the needed parts at Home Depot and is fixing the screen himself. This is a small example of the daily choices he and I both make. Personally, I wouldn’t have it any other way. Any bozo can shell out $120 or better yet, put it on a credit card and buy the new screen door. It takes talent and determination, however, to stick within your boundaries and find an alternative way to make your retirement a successful one.

I don’t know if J.D. Roth has a calculation for that.

Live well and prosper, my friend. Live well and prosper.


  1. Our working incomes were very similar. We were never large earners but I was good at squeezing the nickel until the buffalo belched. We also live on social security and two pensions. Honestly, since we downsized a few years before we retired, we find we have more money to spend now than we ever dreamed.

    Like you, our retirement money is rarely touched. A new air conditioner and finally, after fifteen years apiece, we each got a new car. Those were the only “dips” into actual savings in the last 8 years.

    I think our only difference is that you budget by the day but I budget by the month. I have categories for everything, and when it’s gone for the month it’s gone. It feels good to be in control of your money, doesn’t it?


    • Hi Anne. Yes, it does! Wish I had thought of it sooner. Lots of money over the years wasted through my fingers. Who knew?
      I think you and I are like most retirees. We’re the silent types. No one seems to want to talk about us. But we’re happily making our retirements work.
      Thank you for your comment.


  2. Funny you should post this today. Hubby and I usually have a money management meeting to talk about our future retirement. This morning we realized that we already have enough to live on without putting in another penny or making any interest on the money between now and when we retire. There are factors to consider (i.e. health care, etc.) but for the most part, it is the same amount of money we make now. My husband has 7-10 years left before he retires. You can be darn sure we will continue to save as much as we can, so that when retirement is finally here, money will not be an issue.

    Liked by 1 person

    • Sharon that’s terrific. Maybe hubby can retire early? Hey! You never know. But I do agree that saving as much money possible is key. Congrats to you two!!


  3. Hi Cindi, There really is nothing earth shattering in JD Roth suggestions. The Trinity study and William Bentgen suggested the four percent rules ages ago. More experts, like Wade Pfau lean towards the 3% rule.
    I think Seniors need to realize the interest environment is changing and there are more ways now to increase what their savings can make. Banks are starting to compete with more teaser offers on opening accounts and better interest on their savings and checking. When you are driving around notice new construction of new branches in your area. They usually have promotions when they open. The Brokerage firms are offering more money to transfer Accounts competing with your banks. Understand the length of time you have to keep your money in the accounts and start looking for new offers when you have fulfilled their terms. Layering rewards and offers can really add a lot to your income. In the past month changing where my accounts are added another $1500. I no longer have allegiance to a bank or broker or retailer. I ask the question what have you done for me lately? My Complacency went out the window when I realize it was costing me BIG TIME.
    Talking to a retired IBM executive has me looking at preferred stocks which is adding more passive income in the form of dividends. Reinvesting a portion of these for the next seven years will keep me ahead of inflation more then hoping for a Social Security cost of living increase or that they won’t cut benefits. Compounding is the Eighth wonder of the world!
    I believe if you want to continue to spend at your new level then you need to increase what the money you have saved earns. It is less stressful then worrying over your daily expenses and budget. I refuse to get caught up in the fear mongering and worry that reduced Social Security and Medicare benefits in the future is creating.
    I attended a presentation that was very enlightening on questioning your beliefs when it comes to your financial decisions when you are retired. Some of the thoughts presented.
    What if you: Began tying your discretionary spending to what makes YOU- Happy! Not following society, family, or friends influence or your parents ideology.
    Recognize how your choices of food is more about familial traditions or emotions then what you need for a healthy nutritious diet or caloric needs.
    Are your saved dollars, your employees, working as hard as they can for you?
    Sincerely , Lara


    • Hi Lara. We have two CD’s coming up next month for renewal that were paying 1%. I can hardly wait to start reinvesting them (ROTH) into something that will be paying us more.
      I’ve also noticed that we have refused to eat low level foods anymore. We’ve been shopping for fruits and veggies in a more local upscale market, one that sells local produce rather than buying the same stuff from Aldi (which are imported in from Mexico and China). Nope. Not doing that anymore BUT now, we have to pay! Also, I’ve been buying real furniture lately. No more hand me downs or flea market finds. I’m actually buying brand new, modern, trendy furniture! I can’t believe it! New sheets and towels. No more going to Goodwill. New clothes and jeans and pants. Woo Hoo! All mostly on sale BUT no more hand me downs. And for that, we have to pay! It’s been a real treat and one that has been so deserving.
      The added, higher interest rates have helped. Plus selling our old stuff for cash and reinvesting the money into better quality stuff has helped also.
      Life is good for retirees now! ’bout time!


  4. Hi Cindi, So if you have 3% inflation next year you will need a little more then $1000 to live at the same level. So the presenter said how can you personally increase your passive income to cover this? How many ways can you find to do it? Lara


    • I would do it in a combo: reduce my expenses by at least $500 which isn’t hard to do. And secondly, transfer funds to investments that are paying more in interest which also hasn’t been too hard to do. I’m really liking callable CD’s. Who knew?


    • PS: Once DH’s Social Security kicks in, in a few months, we’ll have an monthly overage. I plan on tucking that cash away in another interest bearing account. There won’t be any lifestyle inflation at our home. I’m liking the level we are at now. It’s very enjoyable and very doable. Thanks again for your input and comments!


  5. So glad you like the callable CD rates at brokerage houses, I told you about years ago on your Thrifty at Sixty blog. To get more then that $1,000 needed for inflation, I switched in May, from having to invest$28,000 in a CD to get $1,000 extra to investing $10,000 in a Preferred stock paying 10.64% monthly dividend yielding $1,064 yearly in my Roth account so doesn’t impact how much Social Security is taxable. I basically have decided I will try not to cut what I spend now and deprive myself of the fun things And healthier food this level of spending provides. No more sacrifices.
    I have never been a Good Will shopper, I have always preferred buying on sale, new items. My attitude has change in recent years how I justify to myself- my way of handling finances and spending. I was a giver placing everyone wishes above mine and now I bless myself first . I have learned the hard way this is the attitude of others that I am close to. Financial Freedom is Awesome! So Happy you are treating you and Nick to a better quality lifestyle. Sincerely. Lara


    • When I shop at a Goodwill, I feel as if I am doing the earth a good favor by recycling things. Sometimes there isn’t a need for a new thing but to find something else in its place that still can be put to good use. Lately, however, I’ve been finding new things on sale that cost less than Goodwill or the consignment shop. Go figure!
      I guess it all has to do with balance. I like to shop now either way. The bottom line is cost, then value, then quality. Knock on wood, I’ve been OK so far.
      I wish you can send me an email and let me know the name of that preferred stock of your. Almost 11%? Youssah!


  6. I have had for three years my lawn mowed and snow plowing. Seriously thinking of hiring a house cleaning service, too. Thinking of investing the $18,000 mentioned above to pay for it. Lara


    • Lara, I’d give anything to have a live in housekeeper with a matching groundskeeper. A husband and wife team who can take over the day-to-day operations in exchange for room and board. I suppose when the true need arrives they will arise. Fingers crossed.


  7. Just tried to find an email contact to send you the Preferred stock. Didn’t find one. You have my email since I comment so drop me an email with “this is Cindi “ in the subject line and I send you information. Lara

    Liked by 1 person

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