In order to define my retirement goals and plan I have to know how much money I'll need during retirement. To know how much money I'll need I came up with a rough budget. Below is the basic budget that I put together.
I should explain a few things here.
First of all this budget is meant to be a rough budget since I'm planning for years in the future. Undoubtedly some circumstances will change over time and I may or may not have all of these bills and I might have some new bills. I am also planning in general for 3% inflation over the long term so these numbers are in todays dollars, pre inflation.
The bills like utilities and insurance are based on my current spending so those are fairly straight forward. Food and eating out are combined figures that plan on four people and eating out for 1-2 meals a week plus over $4 /day per person in groceries. For gas I put in $300 which is more than I use now to give some buffer to account for rapidly inflating prices.
Health insurance is one of the largest expenditures that I expect. Health insurance cost is based off of a current rate quote for a family of four. The $800 per month is a rough estimate covering a "decent" health insurance plan with a medium size deductible. If you are interested, I just looked at the eHealthInsurance site. Note that site is just what popped of a Google search and haven't used it myself to purchase coverage. I am only using it as a reference for ballpark estimate purposes. Health insurance is one item that is likely to increase at a higher rate of inflation, so there is a risk my estimate may be too low in the coming years.
Clothes, travel and Xmas are annual expenses that I just ballparked. Those may be more or less depending but I had to pick numbers so I did so. For my car cost I put down $2500. This is just a rough guess of what I might spend. I buy used cars and keep them for years. My first car was about $7500 and lasted me 10 years and my current car cost me about $14k. I will probably not use $2500 per year on car expense in the long run. I did a guess of $1000 for house maintenance which is much less than I've spent annually so far. But I figured I should account for the large expenses that don't occur frequently like new roof or the like.
So to sum up, this is my total ballpark estimate with basic living expenses accounted for. I am going to use a 3% annual inflation expectation in my figures. I am pretty sure some circumstances will change over the years and when that happens I can tweak the budget numbers accordingly.