Retirement Expenses Calculator

    

When planning for retirement, one of the first things that can be done is determining what expenses might look like in the future. This is done by determining current spending and then calculating what those expenses might look like after being adjusted for inflation. Once future expenses are calculated, the expected payout coming from Social Security can be determined. Subtract the Social Security payout from the inflation adjusted expenses to determine either the budget shortfall (if there are no available investments to draw from) or the withdrawal amount required (if retirement investments are available). 

The calculator below will let you input your current budget and expected future Social Security payout to determine if Social Security alone will be able to cover your expected expenses in retirement. 

Only enter information into the yellow highlighted fields. The calculator is pre-filled with an example set of information. You should alter all the yellow fields to match your scenario. You can use the blank fields in the Retirement Budget section to add additional expenses if necessary.

Calculation Steps

All entry items are designated by yellow highlighting.

This spreadsheet will 1) calculate the inflation adjusted amount of net income required for retirement, 2) adjust for expected social security payout, and 3) result in the amount of net income required from a retirement investment account.  (Alternatively, if you do not have an investment account, you can use this spreadsheet to determine how a retirement budget will need to be adjusted to match expected social security payouts.)

Step 1 - Enter the number of years left until retirement in the highlighted yellow box labeled "Years to Retirement" (C5). This entry will allow the spreadsheet to calculate the correct inflation growth for the set budget. This entry will also give the retirement year in box C6.

Step 2 - Determine the social security payout. Use this link from the Social Security Administration to get a quick idea of the payout. ( https://www.ssa.gov/OACT/quickcalc/ )  For an even more accurate payout amount, you will have to create an account with the Social Security Administration.

When using the Social Security calculator be mindful of a few items. For the future retirement date entry, use your birth month and the Retirement Year from this spreadsheet.

There is an option at the bottom of the calculator to see the estimate in "today's dollars" or "inflated (future) dollars". Choose the option for "inflated (future) dollars".

If there is expected to be two people in the household at retirement, then the social security payout calculation will need to be completed twice. Enter the calculated monthly payout into the "Spouse 1 Monthly SS Estimation" and "Spouse 2 Monthly SS Estimation" boxes in this spreadsheet.

Once these two boxes are filled in, the spreadsheet will return the yearly amount for each spouse as well as the Total Yearly Income expected from Social Security payments.

Step 3 - Enter the monthly expenses that you are currently spending in the "Current Expenses" budget column.

The result will calculate your expected shortfall or remaining income needed in C15 (highlighted orange). If there are no retirement investments to rely on, the Current Expenses budget items can be adjusted until C15 equals $0.00 to determine what your estimated budget would look like relying only on Social Security.

Notes on Budget

The budget is pre-filled with fictional estimates.

Adjustments - When the budget is being filled out, only enter the amount that you are currently spending for you and your spouse. For example, if you have multiple children in the home currently and are spending $1,000 for food each month, do not enter that full amount into this budget spreadsheet. Instead, estimate how much you are spending only for you and your spouse - perhaps $500 - and enter that amount into the budget section for Food Costs.

The most likely budget items that this adjustment would affect might be: Cell Phone, Car Insurance, Transportation Costs, Food Costs, and Entertainment.

Mortgage - If the mortgage will be paid off by retirement, then leave the "Home Mortgage - Principal and Interest" line item blank and place the current escrow cost or property insurance and property tax cost in the "Home Mortgage - Insurance and Property Tax" box.

If the mortgage will not be paid off before retirement, then put the current principle and interest payment in the "Home Mortgage - Principal and Interest" box and the current escrow amount in the "Home Mortgage - Insurance and Property Tax" box.

*There will be no difference between the current and inflation adjusted "Home Mortgage - Principal and Interest" expenses because the terms of the home loan are locked and unaffected by inflation.

Health Insurance and Healthcare Costs - The average expected health insurance and healthcare costs today for a healthy senior entering retirement is $13,165 per year. For two people that amounts to $26,330 per year or $2,194 per month. This amount is already entered into the budget. For a single person, update the current budgeted monthly amount to $1,097.

Leisure / Travel - To determine this amount, calculate how much you would expect to spend on travel, leisure, vacation, etc. per year and divide by 12. In the example given, the estimated leisure / travel expense is $9,000 or $750 per month.

What this spreadsheet does NOT do - This spreadsheet does not adjust for taxes. There are too many individual variables which most people do not easily have access to for this basic spreadsheet to calculate. This calculation only gives the NET amount needed in retirement based on your current spending rates.

To get the most accurate picture of how much total income (both SS and Investment Retirement Account) would be needed, a determination of Social Security taxable amount, amount of retirement investments in both tax deffered (401K), non-taxed (Roth), and/or regular investment accounts would be required. Once the correct income is known from each source, tax can be calculated to produce the gross income required.