Planning for retirement can be challenging, but knowing two key pieces of information can simplify the process: your expected retirement expenses and the portion covered by your portfolio. There are two approaches to determine expenses:

Bottom-up method: Create a detailed budget by listing all your expected expenses in retirement. While this method provides a precise figure, it requires careful planning and consideration of various expenses.

Top-down approach: Consider your current take-home income and determine if it covers all your needs. Then, subtract any future expenses that will no longer be necessary in retirement. This approach gives you a rough estimate of your retirement expenses.

Once you have your expenses, calculate the portion to be covered by your portfolio after accounting for other income sources. Applying a safe withdrawal rate, like 4% or 5%, helps find the portfolio size required.

While this method gets you close to your retirement number, periodic review and professional advice ensure a comfortable and secure retirement. Make sure also to consider other factors like taxes, inflation, marital status, insurance, and lifestyle changes when planning for retirement.


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⏱ Timestamps ⏱
0:00 Intro
1:37 Bottom-up approach
2:11 Top-down approach
3:44 Step 2
5:13 Example
8:48 Other factors
11:51 Outro


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