Expenses Should Rule Your Retirement Years. Not Income.

Paula Pant is an award winning writer and speaker who specializes in budgeting and personal finance. Ms. Pant has a new slant on retirement planning and spending that just may blow all the outdated retirement strategies out of the water. Rather than concentrate and prepare on your retirement income the personal finance experts have been stressing for decades, Ms Pant says there’s a new rule of thumb to consider: your retirement expenses.

Basing your retirement savings goal on your expected annual expenses — rather than your current annual salary — makes a lot of sense. I support this approach and believe that it trumps the traditional rule of thumb that over-focused on your income.

Rather than pick an arbitrary number based on the salary you’ve negotiated with your current boss, you should figure out how much money you want to live on each year during retirement. Then multiply by 25. That’s how much you’ll need to save.

Of course, there is one critical factor in making this approach work. You must be able to accurately estimate how much money you’ll need each year for your living expenses when you retire.


Paula Pant.jpg
Ms. Paula Pant

If you want to read more about Ms. Pant’s new retirement expense theory, click here. But to summarize what Ms. Pant is recommending, it’s rather very easy to figure it out.

Look at Your Current Spending

Look at your current annual spending, project what you plan on spending each year in retirement, do you still have child expenses (college, weddings etc), will you still have a mortgage or debt, will you travel, don’t forget property taxes, insurance, simple medical co-pays and deductibles.

Calculate Your Social Security and Pension Income

Total up what you will be receiving from Social Security, annuities, rental properties, royalties, guaranteed income and any pension.

Now Subtract and Multiply

Subtract all your income sources from your estimated annual expenses. The amount left over is how much you’ll need to withdraw from your portfolio. Multiply this number by 25. This is how big your portfolio needs to be.

Ms. Pant gives us an example:

Expected Retirement Expenses: $65,000 per year

Pension and Social Security Income: $30,000 per year

Net Rental Property Income: $5,000 per year

Formula: $65,000 – $30,000 – $5,000 = $30,000. This is the amount, per year, that must be withdrawn from this person’s retirement portfolio.

$30,000 x 25 = $750,000 retirement portfolio needed.


For us, DH and I anticipate being in dual full retirement in the year 2022. Based on our current expenses I project that our expenses should be in the $40,000 a year category.  Our total income at that time, based on Social Security for the both of us, one glorious pension and one source of guaranteed income, we will be getting $37,082 per year. After I subtract our expenses from our income, that leaves a deficit of $2,918 per year. Times that deficit by 25 years and hubby and I need at least $72,950 in savings cash to tide us through till age 93 and 87 respectively.

This is NOT an impossible feat. In reality, based on Paula Pant’s newfound way of retirement thinking (and planning) DH and I have enough in savings cash to tide us over for the next 68.5 years till age 136.5 and 130.5 respectively. And this does NOT take into affect any equity we have from the sale of our marital domain! Nor have I calculated for inflation, long term care or medical calamities.  So, if as the years progress and you find yourself cash short, cut your expenses. It’s a lot easier, to lower your expenses in retirement, than increase your income.

You can trust me on that fact!


  1. I get it that what it costs to live is the important factor. I’m not getting her theory though on how much you need to save base don expenses estimated today, in today dollars. I really do wonder and worry about inflation. It seems like X25 of current expenses doesn’t take into considerations of of living adjustments. Also, could you say more about why in the scenario shared, you wouldn’t account for these things? ” Nor have I calculated for inflation, long term care or medical calamities.” I understand not counting the sale of the home because my experience from my own parents is that they still needed to live somewhere so when they sold one home, they had to buy a different one, and while less expensive and they earned a lot of equity they paid for things they used to do themselves and for the HOA monthly expenses. that ate several thousand a year of their net gains. I’ll have to read her assumptions and strategy in more detail.


    • Sam, I said I didn’t count in inflation etc for Pants strategy when I ran my own numbers. It was a given, I thought, that everyone knows I live on $25,000 a year. So the $40,000 I projected did take into account inflation, but a predetermined one. I don’t ever see myself spending more than $40K a year. I deal with inflation by cutting expenses and some semblance of investments (that’s my guaranteed income). As far as long term care or medical calamities, I don’t think I can estimate how much I would need for that. That’s where my home equity comes in. I would exchange my home equity for either nursing care, assisted living or hiring outside help. If I resettle in a one bedroom apartment styled condo vs a private hone, I’ll be ahead of the game.
      It’s just another way at looking towards retirement. What worked before isn’t working today. Especially that 4% rule and saving millions of dollars.
      I’m coming to the same conclusion your parents did about the sale of their home. If we sold and bought another home, with the constant rising prices, it might just be a lateral move and that kind of move will help no one. Again, we’re just starting to explore staying in place or relocating. We haven’t decided. It’s cheaper to stay. But then its more exciting and challenging to move.
      Check out Paula Pant. I don’t agree with everything she says or does BUT it is a new world out there and people are starting to change their perspective and advice.
      Thanks for your comment.


  2. Her method, and your method, is the method I use. I don’t think any of us can predict long term care in this country. It is impossible. My older relatives had excellent long term care policies but the newer policies are much shorter and the premiums go up. In fact, some of the premiums become unsustainable. There has been chatter on some parts of the inter about how worthless some of these policies are and it is better to bank the premium amount, earn interest, and essentially self insure. There was an article in MSN where an 82 year old had paid on her policy for 20 yeas, yes, the premium rose but then it increase to over $500 a month ( I cannot remember the exact amount) and she can no longer afford the policy after paying in it for 20 years. I have a policy but I think it is worthless. I just do not trust insurance companies. I have thought of moving to Mexico and hiring someone to take care of me. Also, I just don’t want to remain bedridden or not know my own kids for years. I have relatives with Alzheimer’s. I would rather be dead. There is no good solution with our healthcare at the moment.

    Liked by 1 person

    • Hi Cindy. Well, yesterday our president signed an executive order supposedly improving Medicare for us seniors: “the president has directed HHS to take a number of specific, significant steps that will meaningfully improve the financing of Medicare, advance the care American seniors receive from their doctors, and improve the health they enjoy.”
      Let’s see if there really is an improvement. I think the private Medicare Advantage insurance has been enhanced. Time will tell.
      I too have heard stories about Long Term Care not being such a good deal anymore. I think the greatest boon to seniors is going to be in technology: robots, telecommunication, home delivery and home health care. Again, lets wait and see what happens. I’m hopeful.
      I hear you about moving to Mexico. I’ve considered moving to Italy! But then again, I’d be too far from my children. Not a good thing!
      Thank you, as always, for your kind comments and thoughts! I appreciate them.


  3. Not to be negative but as a widow things can change as I well know. Should a partner pass does that pension go away or that guaranteed income or the surviving would be down to one SS monthly check. That would worry me.


    • Hi Jo. When my husband first got his pension, we filled out the paperwork that would include me to continue to receive his benefits upon his death. The payments will be a bit lower ($100), but since I’ll be alone, I won’t be needing as much money. The second thing is that my husband was a bigger earner than I was. So, I took Social Security first at 62 and we are delaying hubby’s social security till 65. This way hubby’s check will be a lot larger than mine and upon his death I will get his larger amount in exchange for mine.
      The guaranteed income is in both our names with survivor to take all.
      If I should die before my husband, he will fare a lot better off than the other way around. He can continue to live here in our home. Me? I would feel too isolated and unable to keep up with the maintenance. I prefer apartment living. There’s enough equity for me to sell, buy another living arrangement (I like assisted, active adult communities) and that’s where I would go.
      We also both have life insurance policies on each other. Plus we both have expressed we would like to be cremated so as to cut down on funeral expenses. We both have wills, power of attorney and health proxies.
      My husband is a semi-hoarder. We always joke around that the first thing I am going to do when he passes away is hire 1-800-Got-Junk and just throw all his crap away. He’s got a 2000 Jeep Cherokee buried down deep inside his garage/barn that still, 19 years later, he hasn’t touched yet. He was supposed to change the engine and sell it for a profit.
      Oh well.
      PS: Jo, don’t be worried. Couples need to sit down and talk to each other about the inevitable. Once you have that ‘talk’ the worry goes away.
      Hope this helped.


  4. Hi Cindi, $25,000! I thought you lived with discretionary spending and travel on $34,000 including what Nick and you make on part time work. At thrifty at sixty you had increase from $28,000 to plus $31,000.
    FYI: Paula Pant is just the latest financial blogger of the Fire community to spin a new slant of old fashion financial advice matching income to expenses that I read years ago in Sylvia Porter huge volume The Money Book, Charles Givens earlier books, and any library’s money section has tons of books slanted this way. One of my favorite was the paperback with a title something like The 10% solution to the salary trap. To prioritize setting 10% aside in long term savings as an expense in your budget, paying yourself first. I read this in the 1970’s.
    Clark Howard radio show and books were about ten years earlier to Paula Pant’s real estate investing and expense matching. Dana Anspach of Sensible Money has a great current YouTube video on Matching Expenses to Passive Income.
    There is plenty of sources for great financial advice but there are even more marketers to get you to spend your money on truly nonessential items immediately and over extend by putting on a credit card or monthly payments. Advertisers play heavily to the entitlement mindset.
    Me thinks you dismiss inflation planning too lightly in your calculations for three years from now. A 3% inflation rate for three years is progressive when looking at what your present spending is. Let’s take $34,000 and next year at 3% you will need an extra $1020 to buy the same lifestyle or $35,020. Year two 3% is $1050 or $36,070. Year 3 will need an extra $1080 or $37,150. In less then three years after Nick retires what you get in SS and pension will be used to maintain all your current spending without any left for savings if inflation runs 3%. Your frugalista techniques I pray will help you have a much lower yearly inflation rate. But-The reality of selling your house to free up more money is probably a necessity, it’s just a question of how soon if inflation erodes your buying power. Lara


    • Lara, our income fluctuates all over the place. That’s because we just don’t have a steady income as of yet. I’d say it fluctuates between $25,000 and $29,000. But I still have to withdraw at least $6,000 a year to cover taxes and vacations. Using savings however, is not income. So we’re living maybe on $35K a year. That’s why I think when we reach full retirement I’d calculate $40K as a good sound base. That’s without drawing any more money out of savings.
      I have come to the same conclusion as you, as do all the retirement quizzes I take, that eventually we will have to sell our home and downsize yet once again. So, we started looking. The earliest we can move is in 2.5 years. Doesn’t mean we’re leaving NY. There are tons of retirement communities being built up around here in the state. So, I’m happy about that. I like it here. I trust the state, I know the laws here and my kids are nearby.
      In truth, I’m certain Nick and I will be fine!
      I remember reading a great book by Charles Givens: Wealth Without Risk. He recommended owning rentals, especially in college towns so your kids could go to college for practically free. Everyone laughed at him and ridiculed him obsessively. Then a few years later, other financial gurus were touting the same exact thing.
      There are many ways to slice a rabbit. The best thing to do is to read everything and figure out what is going to work for YOU. But the main thing is to read everything!
      BTW, Paula Pant doesn’t ask you to buy anything from her. She’s all free. Her podcasts are good too. Her motto is: “You Can Have Anything. But You Can’t Have Everything.”
      Good words to live by.
      PS: I am NOT worried about inflation. Period. What I am worried about is the rising costs of health care! And we’re not even fully retired yet!!! Eyecare, dental care, hearing care……UGH!


  5. Rising cost of all the goods and services we use is what inflation is. Health care for seniors is the largest percentage of the rising cost in the 3% inflation figure. So in essence you are worried about inflation.
    Paula Pant podcast page is filled with affiliate links at the bottom and she probably gets compensation from. IMHO, you are naive to think it’s all free. Her degree is in psychology and sociology and she became a writer for The Balance. Lara


    • Lara my eyes are trained not to see ads. It works! If I didn’t send Paula any money, it’s free to me. Let’s not be naive and think people do things for nothing.
      I’m going to do a whole post on how I deal with inflation. Inflation is calculated with people buying the same thing year in, year out. But what if In the future you buy different things or not at all any more?
      Also bills can be reduced. Such as my property taxes, finding new medical coverage plans, buying different less expensive foods, moving to less expensive areas. There are many many ways to deal with inflation. It’s nothing to be frightened off. The president just signed an executive order helping seniors lower their medical costs through Advantage plans. I still have to check them out.
      I won’t have inflation beat me or scare me.


  6. Hi Cindi, Inflation won’t beat me nor does it frighten me because I recognize the need to be ahead of it, by planning increase passive income streams that maintain the quality of life I live.
    Unlike you I believe tapping savings should be considered as income, as a retiree this is passive income accumulated from work and investment gains and is an integral part of how I pay for the last third of my life.
    At 65, Medicare cost and my other supplement insurances increase from my DH group plan by 2.5 times raising my personal inflation to 11% that year just because of that! And this is a permanent ever increasing bill. My planned saved HSA will pay these bills for seven years if I have no major dental or medical event that wipes it out. But I have a backup plan too if this occurs.
    Now at 66 almost 67, I draw a line in the sand and will not be cutting out quality organic produce, hormone and steroid free meats, a warm home in three seasons and cool in summer. Also Home Maintenance needs, and services like lawn cutting, snow plowing, and soon a maid. Adequate discretionary money for vacations, celebrations, entertainment and hobbies. I saved a percentage of my total income throughout the last 21 years of my retirement and because I am self insuring long term care I will always continue to save recognizing those cost are increasing by greater then 3%.
    Once a saver, always a saver. I still like finding bargains and getting rewards. And I will continue to plan and set goals for a joyous retirement. Sincerely, Lara

    Liked by 1 person

    • Like you Lara, I made my own line in the sand too. You just get to this point in your life where you say ‘No More’ or ‘Enough!’ I love right where I am at right now and I want to stay this way for like forever. I’m not cutting back on a single thing.


      • Good for you! Your description of dealing with the government official inflation boils down to minimizing your personal inflation rate to be lower then the rising cost across our nation. Yes there is more flexibility in what we chose, but sadly what we need, those cost keep rising. You are very lucky to get senior property tax relief but property re-assessment can increase that figure in the long run. Sincerely, Lara

        Liked by 1 person

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