Financial planning consultation services, based in California. http://abouterroldmoody.weebly.com/

1. Errold Moody
PhD MSFP MBA LLB BSCE
Current and Retirement Budget
Of all the issues impacting retirement, the amount of money you project to spend during retirement
has a significantly greater impact on the amount of funds needed than the projected inflation rate,
return on investment or anything else. Further, using a rule of thumb- say 60% to 80% of current
budget- is invariably a simplistic method designed for very superficial analysis and should never
be used for any long term planning. If you are off "just a bit", the amount of funds you believe
you will need may not remotely match the funds you will spend during retirement. You don't want
to find out at 70 years of age that you are going to run out of money in the next five years because
you didn't do the number properly when you were 50. It's too late at that point to make adequate
adjustments.
(For the purists, I understand that there is a lot of “compromise” and “guesstimates” with
some figures and that the projections of inflation and returns in the future are also based on
unknown rates. That said, if the budget- which can be determined with some exactness- has no
real life element, the whole process can be wasted.. Further, if the retiree/investor refuses to so the
necessary homework, the analysis will tend to be valued accordingly.)
The following is the most detailed budget currently in use. It may take quite a bit of time to
get all the figures (remember some of your payments may be made only annually and you therefore
must track down payments made many months previously).
Now this is how you do retirement budgeting. Look at each one of the line items. See how
they might change when you retired. One example is clothes purchases. You obviously are not
going to be buying lots of new clothes- certainly business suits- and you should reduce the amount
accordingly. Maybe you are going to retire to Florida where you can forget snow removal- by the
same token your utilities will be higher in the summer due to air conditioning. The point being is
that you simply don't take 65% or 75% of current costs because there are too many factors
impacting the decision. So take your time before putting just "any" number in the retirement
column. Add up the numbers when through and you should have a pretty good budget on which a
good plan may be developed. I also know that the younger you are- certainly age 45 and under-
the more difficult to determine valid retirement numbers. But you have to start someplace. For
those 45+, the need to focus on retirement numbers is mandatory and you have no choice but to
complete carefully.
Expense Item Current During Retirement
Food
Groceries
Alcohol/Tobacco
Restaurants

2. Personal
Work related
Appliances and Cookware/Kitchen
Entertainment and Recreation
Vacations
Travel
Recreational Equipment/Activities
Biking/Kayaking/Fishing/Hunting/Hiking
Sporting events
Movies/Theater
Parties Hosted in home
CD's/tapes
Fitness club
Cable TV
Country Club
Computer
New computer
Upgrades
Software
Repairs
Supplies
On line services
Miscellaneous Supplies
Gifts and Contributions
Religious and Charities
Political causes
Family gifts/birthdays
Non family gifts
Christmas gifts
Transportation
Car payments
Auto Maintenance
Auto Insurance
Parking
Parking Tickets
Parking Permits
Public transportation
Carpool costs
Taxes and Fees
Tolls
Gas
Oil

3. Registration
Clothing
Mending/repair
Dry Cleaning/laundry New purchases
Shoes
Work Clothes
Childcare/parent/dependent Care
Daycare
Cleaning
Medical care Babysitting
Personal Care
Hair Care Toiletries
Personal care appliances
Pocket money allowances
Massages
Education
Newspapers
Education/training expenses Books
Magazines
Professional Dues
Personal Tuition
Personal Room and Board
Child tuition & Room and Board (Current)
Child tuition & Room and board (Future) Miscellaneous Supplies
Obligations
Income Tax
Medicare
Social Security
State Tax
Consulting Fees Tax preparation
Other Tax
Life Insurance
Term
Whole Life
Universal Life
Variable
Index
Disability Insurance
Umbrella insurance
Credit card fees
Credit Card Payments

4. Interest
Principal
Finance Fee
Cash fee
Alimony/support
Child Support
Child care
Child Allowances
Business expenses
Attorney fees
Accountant fees
Other debts/loans
Union Dues
Storage Fees
Postage
Savings
Personal Savings Retirement Savings
Company stock/options 401(k)
TSA's (403(b)/501(c)3))
IRA's
KEOGH
SEP
Investments
Individual Securities Mutual Funds
Real Estate
Annuities Fixed
Variable
Home
Home mortgage/rent
Interest
Principal
Maintenance
Furnishings
Gas
Oil
Electricity
Telephone
Property Insurance
Fire insurance
Earthquake insurance
Flood Insurance
Umbrella/liability insurance
Contents/personal property insurance

5. Property tax
Condominium Fees
Water
Sewer
Well Maintenance
Septic Tank cleaning Mowing Service
Landscaping Service
Snow Removal
Second Home (repeat above)
Medical
Hospital
Physician
Dentist
Prescriptions/Vitamins
Health Insurance
Medigap Insurance
Pets
Veterinarian
Food
Board and Care
SUBTOTAL
MISC. 5-10% of subtotal (May seem excessive and will need to be addressed with adviser.
However, I think that medical costs and the like might fit in here since they have been escalating
beyond all reason. And if not that, why not something else over 20- 30 years? Note that I included
parent care along with child care. This is not just a financial burden but a huge emotional and
physical burden mostly on women. One might even want to include something for respite care.
Notice pets- we really tend to keep them for a much longer time than in the past and the costs
can be substantial.
TOTAL CURRENT YEARLY EXPENSES
Current Yearly Expenses MINUS Federal and State Tax= After Tax Current budget
This budget is then used by an adviser to determine what type of risk/investments are needed
to fund retirement. You do not need to take more risk than is absolutely necessary. That said,
current economics plays a major part. Bond funds had traditionally provided some reasonable
return. But with the FED increasing interest rates for many years to come, it will be necessary to
reevaluate portfolios frequently. See also DCAD- Dollar cost averaging down- which is
mandatory in keeping losses to 10% to 15% in the worst of recessionary climates.