I’ll be straight up: I cannot picture being retired. I cannot envision what my retirement will look like. I mean, I imagine it’ll look similar to life now, but with less work and more animal/garden time. But it’s like a channel on TV or a station on the radio that I just can’t seem to tune into clearly.

Nonetheless, I’m taking retirement planning more seriously and trying to figure out this whole saving for retirement thing. Like, plugging in numbers into the Sorted retirement calculator and everything. But I’m getting tripped up on a very basic thing: How much I am going to need in retirement? Figuring out the costs of retirement is proving tough.

For one, inflation’s a bitch. I’ve been using this calculator to do projections – trying to work out, for example, what groceries and utilities might cost in 40 years. It looks like at 2% annually, I can expect any given amount to basically double. At 3%, it would more than triple.

For another, I expect to outright own my home. That said, I will have to keep paying insurance and rates (both are about $1200 a year currently, or $2400 total). And then there’s repairs/maintenance (again, huge question mark there).

Housing in retirement is a huge factor, though. Let’s take a look back at the past 10 years (2006 compared to 2016, which are basically the exact years I spent as a renter) in NZ. The RBNZ calculator suggests there was a 5.3% compound average annual rate increase in the cost of housing over this time period. Definitely gels with my experience – a decade ago you could get a 3 bedroom rental for $350 in my old neighbourhood, nowadays that would get you 1 bedroom…

But then there’s new costs to consider. Fun ones, like travel – will I be spending more on travel? How much? I mean, I could easily spend TONS travelling, but I’ll have to stick to a budget of some sort.

And the not so fun, like healthcare – will individuals be expected to shoulder more of our own health costs in 40 years? Will I have health insurance at that point? Will I be in good, average, or poor health? My mum is going through some health issues right now. She texted me the other day to say she thinks she needs to look into hospital insurance cover, and finally admit she’s getting into her old age.

#### Tell me your secrets – how are you calculating your retirement needs?

Your blog made me giggle. I was trying to work it out as well last week. I gave up and went and walked the dog instead! Another question to throw into the mix is will there still be superannuation by the time we reach the (ever moving) goal posts of retirement age? Factor that in and we need to save less. I ended up working out what it costs us a year to live now. Then I ducted what NZ Super would pay a month to give me a figure. Then I multiplied that out over the years. Rough as guts but gave me a rough idea of how many years worth of savings I have set aside already. Many more to go! Happy Saving!

I’ve tried calculating it with different calculators but yeah… Inflation sucks. And as such, I need to triple my savings efforts or envision a retirement with less travelling. ^__^;

I use a simple way to work out my retirement number. I use my annual living expenses, take away any expense that you sure you don’t need in retirement (in my case, mortgage payment and daycare), add the current annual cost of anything you wish to do after retirement (like travel), that number is your annual living cost if you retirement today. Now multiplied that number by 25, and that’s how much it will take you to retire today. That retirement number less your saving and investment will be what you need to save/invest.

If you want to work out the value of that in X years, you can use an FV function in excel with the inflation rate at 2%.

The formula is over simplified but it gives you a rough idea of how much you’ll need.