Many people are now thinking that they will have to postpone their retirement, based on the dramatic downturn in the stock market in recent weeks. It has been a shock, although there are already signs that savvy (and brave) investors are about to start buying at bargain prices. But one effect of the uncertainty, coming on top of the long term decline in real estate prices, is that people have to think more carefully about their current spending. That’s why I think this (I hope) brief downturn can provide a useful lesson. The lesson is, how much or how little we need to live on currently. If we strip away expenditures that we really didn’t need to make, we’ll understand how much it costs us to live where we are now, and that can be a good guide to what we’ll have to spend in retirement. As I’ve written before, the number is not some percentage of what we’re spending now, like 70%. It’s whatever it costs, in utilities, insurance, clothing, food, etc. By knowing what we need to spend now, we can learn what we’ll need to spend later. If our retirement savings cover those expenditures, it could tell us what more we can do in retirement, in the form of trips, second homes, etc. Some clients have asked for assistance in determining what their expenditures are, and I have prepared a template that I use myself and suggest to others as a way of gathering information on their expenses. If you would like a copy (gratis), e-mail me at rlouis@saul.com.