RETIREMENT PLANNING
Start with planning to have 80% of your pre-retirement income available for annual use, but then factor in lifestyle and health scenarios that will reflect your needs.
Spending too much too early or taking an early retirement may affect your success in affording the retirement of your dreams.
After years of hard work (and some delayed gratification), you’re finally looking forward to a fulfilling retirement. And you have some big plans. Travel. Fine dining. A cozy cabin in the woods.
The question is: Will you have enough money to make those plans a reality?
If you’re just starting retirement or expect to do so soon, you may be looking at your retirement assets—401(k), IRAs, annuities and other investment vehicles, as well as Social Security—and feeling comfortable. For American workers, 68% feel confident that they’ll have enough money to live comfortably in retirement. Among retirees, that confidence level is around 74%.1
But the fact is, many retirees and retirees-to-be may be overconfident. And that means they’re likely to overspend. People who do often find that those golden years become tarnished—and more quickly than they could have imagined.
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That’s up to you to determine based on how you want to live out your retirement years. You may have heard the general rule you need 80% of your pre-retirement income for annual use in retirement. That is a good starting point. But then you need to factor in your anticipated lifestyle and health scenario to come up with a figure that reflects your needs.
For example, with all that extra time on your hands, finding entertaining ways to fill the hours could mean spending more than 80% of the income you were earning before retirement. And that can quickly break any budget.
This doesn’t have to happen to you—if you look at retirement more like a marathon and less like a sprint.
If you want to comfortably enjoy your retirement years, it may help to avoid these common temptations:
Spending too much in the early years. This temptation comes from the hard balance of enjoying your time while you are younger and healthy, but potentially needing extra income to balance additional medical challenges later in retirement years.
Here are the challenges of leaning too hard on the enjoying time when younger:
While the current life expectancy in the U.S. is about 80.2 years for women and 74.8 for men,2 those numbers climb as people get older. For instance:
You could say that the longer you live, the longer you will live. And your retirement assets will need to last longer, too.
Taking early retirement. That’s not always by choice. Health concerns and job loss sometimes make it unavoidable. But some people do retire earlier than they should.
This may be because you don’t want to wait, particularly when you can start collecting Social Security at age 62. But that also means you’ll receive only 70% of the Social Security retirement amount you would have received if you had waited until age 67 (assuming you were born 1960 or later). Retire at age 70, and you’ll get 124% of that benefit.4
In other words, while taking your Social Security benefits early means you get your money sooner, it also means less income per month for the rest of your life. And by retiring early, there is the potential you’ll also be withdrawing sooner from your other retirement accounts.
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If retirement is starting to look a bit more boring than you expected, there are some ways around that. You can craft a plan that combines a budget and retirement asset preservation—while still including a healthy helping of fun. For instance:
Consider withdrawing from your taxable retirement accounts first. This lets you take advantage of what could be potentially lower capital gains tax rates while allowing your tax-deferred and tax-free accounts to keep growing.
The success of this strategy depends on your retirement age—and other financial considerations. Keep in mind that at age 73 , or age 75 if born in 1960 or later, you may be required to take a minimum distribution from certain tax-deferred accounts like a 401(k) or traditional IRA.
Tailor your withdrawals to you—not to what everyone else is doing. Some people say you should commit to withdrawing 4% of your total assets per year during retirement. While that may work just fine for some people, everyone’s situation is different. You need to develop a retirement spending plan that fits your financial situation.
When deciding on a plan for yourself, here are a couple factors to keep in mind:
Inflation. Even at a fairly modest level, over a period of years or decades, inflation could take a big bite out of your buying power.
For example, with an average annual inflation rate of 3.6% for the past 40 years5, here's what happens to $1,000:
| After | $1,000 would be worth |
|---|---|
| After | $1,000 would be worth |
| 5 years | $832.51 |
| 10 years | $693.07 |
| 20 years | $480.34 |
To put it another way, after 20 years, the average inflation rate would have cut your buying power to less than half of your original $1,000.
Health care costs. While Medicare and Medicaid—or similar health insurance plans—may cover much of your health care costs during retirement, they won’t cover everything. For instance, while Medicare may cover some of the costs of an assisted living or long-term care facility, it may not cover them all.
Because of this, your plan might need to include setting aside extra savings in case you need to cover a portion of your assisted living or medical care costs in the future.
Be prepared to pivot. Even with a carefully designed savings and investment plan, you may find that you won’t be able to build up enough assets to live out your retirement dreams.
Which means you may have to pare back your aspirations. Or you may decide to work longer to sock away more retirement dollars. You also might decide to work part time or start a small business after you’ve retired from your full-time job to add more dollars to your retirement nest egg.
The bottom line is that retirement isn’t the time to give up the habits that enabled you to build your assets. Budgeting, planning and long-term thinking—and yes, a little delayed gratification—will give you the best chance of having the funds you need in time for your retirement date.
Maybe you won’t be able to afford all your retirement dreams. But by planning ahead and playing it smart, you may still be able to afford an enjoyable and generous life throughout your retirement.
1 “2024 Retirement Confidence Survey,” The Employee Benefit Research Institute. April 25, 2024.
2 “Life Expectancy,” Centers for Disease Control and Prevention National Center for Health Statistics. January 28, 2025).
3 Social Security Administration, Retirement & Survivors Benefits: Life Expectancy Calculator. (January 28, 2025).
4 “Effect of Early or Delayed Retirement on Retirement Benefits,” Social Security Administration. https://www.ssa.gov/oact/ProgData/ar_drc.html (January 28, 2025).
5“Historical U.S. Inflation Rate by Year: 1929 to 2024,” Investopedia, (January 28, 2025).
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.
Thrivent employees have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.
