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Part 1: Multiple stages, multiple costs

Complete the development of your personal Cash Flow Statements. Give appropriate consideration to the expenses you may anticipate in the early, middle, and later retirement years. This involves a critical review and perhaps even some guesswork on your part. Just think about:

• what you expect to do, and for how long
  
  
• how you expect to live
  
  
• what it will all cost

and you will do fine. The workbook will help you organize your thoughts and get you thinking about some of the different expenses related to each stage of life.

Express all costs in today's dollars as best as you can estimate them. Then fill in your estimated costs for each retirement stage on the Cash Flow Statement with the 3 extra columns in your workbook on page 27 (you can also use the one we started on back in Lesson 2 on page 8). If you are working on the Excel spreadsheets, add the extra columns to your current spreadsheet.

How does accounting for different retirement stages affect your planning? Log your answer in here.

Extra Tips
Costs In Retirement: Some experts maintain that expenses tend to be greater in the early years due to travel costs and the expenses associated with the fulfillment of lifelong dreams during that stage of retirement. These planners argue that income needs and expenses typically decline in the middle years of retirement, and then spike back up in later years due to medical expenses. See how this Roadmap to Retirement Alumni took a look at categorizing the stages and costs of his retirement.

Saving Money: One way to estimate living costs decades from now is to express all expenses in today's dollars while making an educated "guesstimate" regarding changes in those expenses at various points in the future. Look at your cash flow situation and note one area where you could reduce expenses (thus increasing savings). Post on the Investing for Retirement board, and scroll through and see what other areas people think they could cut back. Calculate your annual savings from your "Living Below Your Means" idea, decrease you monthly expenses by this amount and note the impact of that money-saving idea on the number of years you need to work or the amount of money you will leave behind. Pretty cool, eh?

See how this all works. Run through Josh and Millicent's retirement plan with them and see how their expense data for their stages of retirement affects their overall retirement costs. (We'll also show you a way to use the calculator to get a sense of it all).

Did you catch it all?  See what other people think about their retirement costs on the Investing for Retirement board. You might be surprised by what you've left out!