Jeremy Keil explains step 1 of the 5 step retirement plan: retirement spending.

When it comes to retirement planning, one of the biggest questions people ask is: Where do I start? The truth is, before you think about investments, taxes, or even when to claim Social Security, you need to figure out one thing—how much you’re going to spend in retirement.

This is what I call Step One in creating your retirement master plan, which I’ve outlined in my book Retire Today. While many people assume retirement planning begins with assets and income, I believe it begins with spending. After all, if you don’t know what you’ll spend, how can you know how much income you’ll need?

Why Many Budgets Fail

When I sit down with people, their first instinct is often to start building a retirement budget. They think they need to track every coffee, grocery run, and gas fill-up to get an accurate picture. But here’s the problem—budgets are almost always wrong.

People underestimate their spending, forget about irregular costs, and end up thousands of dollars off the mark. I’ve seen it happen time and again. Instead of building from the ground up, there’s a simpler formula that works nearly every time:

Income – Savings = Spending.

Whatever comes from your paycheck into your checking account typically gets spent—unless you’re intentionally saving it. By starting here, you can find your true monthly lifestyle amount without overcomplicating things.

The Story of Thomas

Take Thomas, for example. He had what I thought was the best budget I’d ever seen—two years of detailed expense tracking. Every expense logged, every penny accounted for. He proudly told me he spent $7,000 per month.

When we broke it down, though, we realized he didn’t need years of tracking to figure this out. His income was $104,000 per year. He saved $20,000 into investments. That left $84,000 for spending—or $7,000 per month. Exactly what his “perfect” budget said, but it took him two years to arrive at something the formula showed in minutes.

Don’t Confuse Saving with Growing

One caution I often give people is not to confuse saving with growing. If you’re putting $500 into savings every paycheck, but pulling it out later for property taxes or vacations, that’s not saving—it’s managing cash flow. True saving means money you set aside for the long-term, not just for short-term annual expenses.

This distinction matters because when you’re projecting retirement spending, you need to know what’s truly ongoing versus what’s temporary or irregular.

The Costs People Forget

Even when people nail down their monthly lifestyle amount, I often see them forget two of the biggest retirement costs:

Health Insurance – Before 65, you’ll likely pay much more out of pocket than once Medicare kicks in. A good rule of thumb is budgeting around $1,000 per person per month, but this varies widely. Taxes – Many retirees underestimate taxes, or treat them like a fixed bill. But taxes are flexible—you can plan, shift, and smooth them over time. That’s why I recommend using tax planning software or working with a planner who can show you different strategies. Don’t Forget the “Non-Lifetime” Expenses

Your monthly lifestyle spending is the foundation, but retirement also comes with non-lifetime expenses—costs that won’t last forever, but you should still plan for.

These often include:

• Paying off a mortgage (which eventually goes away).
• Buying a new car (which will likely happen more than once if you retire in your 60s).
• Home renovations and repairs (you’ll notice more when you’re home full-time).
• Big trips and family events.

If you don’t plan for these, they’ll sneak up and throw your retirement plan off track.

Why Step One Matters Most

Retirement is not about hitting a magic savings number—it’s about matching your income to your lifestyle. Step one is figuring out your lifestyle amount: how much you need each month to live comfortably. Once you know that, the rest of the retirement plan—your investments, your tax strategy, your Social Security timing—can all be built around it.

Too many people start at the wrong end of the problem. They focus on how much they’ve saved, and then try to make their lifestyle fit. But if you start with your lifestyle first, you’ll have a plan that feels realistic, sustainable, and personalized.

Take the First Step

If you’re planning for retirement, start today. Look at your income, subtract your true savings, and you’ll know your lifestyle amount. Then, don’t forget to factor in health insurance, taxes, and those one-time expenses.

This is step one of creating your retirement master plan. Once you’ve got it, you’ll have a clear starting point to build the retirement you deserve.

And if you want to go deeper, my book Retire Today walks you through all five steps in detail.

Because the truth is simple: if you know more about your money, you’ll feel better about your money—and you’ll make better decisions in retirement.

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Additional Links:

• www.5stepretirementplan.com
• www.JeremyKeil.com 

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Retirement Revealed
• Book an Intro Call with Jeremy’s Team

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