Ep 186 - Retirement Budgeting Basics: 4 Costly Mistakes Canadian Retirees Keep Making
Many pre-retirees underestimate what retirement will actually cost, even when they’ve carefully tracked their spending. In this episode, Joe Curry walks through practical retirement budgeting basics, showing you how to estimate your true lifestyle spending and avoid the most common optimistic assumptions that can derail a retirement income plan.
Key Takeaways
Start with what you actually spend today.
A simple way to estimate retirement spending is to look at what lands in your bank account, subtract savings and work-related costs, and use the remainder as your lifestyle baseline.
Bucket your retirement expenses.
Separating spending into necessities, lifestyle expenses, and larger one-time purchases makes your retirement income plan much easier to manage.
Health expenses often increase later in retirement.
Even in Canada, not all healthcare costs are covered. Support services, medications, and accessibility changes can become meaningful expenses over time.
Home maintenance is the most commonly missed expense.
Many retirees treat repairs as one-offs, but something in your home almost always needs attention. Planning to spend 1–3% of your home’s value annually can prevent surprises.
Retirement doesn’t always reduce lifestyle spending.
With more free time, social activities, travel, and family spending can increase — meaning your day-to-day lifestyle costs may stay the same or even rise.
Insights Worth Sharing
“Most people track their spending well, but they’re still a little too optimistic about what retirement will cost.”
“Retirement doesn’t automatically make your spending go down. Sometimes every day becomes Saturday.”
“Home maintenance isn’t a one-time expense. Something in your house will almost always need attention.”
“You don’t want to underestimate what a good retirement actually costs.”
“The more big projects you leave for retirement, the more uncertainty you add to your plan.”
Retirement Budgeting Basics: Avoid These Costly Planning Mistakes
One of the biggest risks in retirement planning isn’t saving too little. It’s underestimating how much retirement will actually cost. In conversations with clients who are approaching retirement, I often see people doing a lot of things right. They track spending, maintain detailed spreadsheets, and have thought carefully about their retirement goals. But when we compare their current spending to their projected retirement budget, there are often a few blind spots that show up. The good news is that retirement budgeting doesn’t need to be overly complicated. But it does need to be realistic.
Start With Your Real Spending
If you’re not someone who enjoys building detailed spreadsheets, there’s a simple shortcut. Look at what actually lands in your bank account each month after taxes and deductions. Then review what’s typically left over at the end of the month across a full year. From there, subtract items that will disappear in retirement - such as retirement savings contributions, work-related expenses, or mortgage payments if the home will be paid off. What remains is a rough estimate of your lifestyle spending today. From there, add in things you plan to do more of in retirement - travel, hobbies, or new activities. This gives you a starting point for your retirement income planning.
Bucket Your Retirement Expenses
A helpful way to simplify retirement budgeting is to organize expenses into three buckets.
First are core or necessary expenses, such as housing, food, insurance, and utilities. These are the costs that must be covered no matter what.
Second are lifestyle expenses, including dining out, entertainment, hobbies, and time with family.
Finally, there are larger or irregular expenses like renovations, vehicle purchases, or extended travel in the early “go-go” years of retirement.
This structure makes it easier to see how spending may change over time and helps you plan withdrawals more efficiently.
Where Retirees Often Underestimate Costs
There are several areas where optimistic assumptions tend to sneak in.
Health and medical costs are one example. While Canada’s healthcare system covers many services, things like physiotherapy, medications, dental care, and support services can become meaningful expenses later in retirement.
Another common oversight is home maintenance. Most people treat repairs as isolated events - replacing a furnace, repairing a roof, or updating appliances. But over time, these projects add up. A good rule of thumb is to plan on spending 1–3% of your home’s value annually on maintenance and updates.
Lifestyle spending is another area where expectations can be off. Many people assume they’ll spend less once they stop working. In reality, retirement often means more time for social activities, travel, and family - which can keep spending steady or even increase it.
Plan for Big Purchases Carefully
Large projects like home renovations, vehicle purchases, or major trips can also introduce uncertainty into a retirement plan. Prices change over time, and what looks affordable today may be significantly more expensive when retirement arrives. Whenever possible, completing major projects while you’re still working can reduce risk and make retirement income planning more predictable.
The Goal: A Realistic Retirement Plan
The goal of retirement budgeting isn’t to scare you. It’s to build a realistic picture of what a great retirement actually costs. When your plan reflects how you truly live, you gain the confidence to enjoy retirement without constantly worrying about whether the numbers will hold up.
Learn more about our retirement planning process at MatthewsAndAssociates.ca.