You've probably heard the rule of thumb: you'll need 80% of your pre-retirement income in retirement. It's everywhere — and it's mostly wrong. Some retirees spend more in retirement (travel, hobbies, healthcare). Some spend less (no commute, mortgage paid off). The 80% rule doesn't account for your actual life. Here's a better framework.
The Three Tiers of Retirement Spending
Housing, food, healthcare, insurance, utilities, taxes. These must be covered — ideally by guaranteed income.
Dining, travel, hobbies, gifts. Important but flexible — can be reduced in a down market.
Extended international travel, second home, major gifts to children, legacy goals, bucket list items. These come after the first two tiers are funded.
Typical Retirement Expense Breakdown
The OC Reality Check
Here's a sample monthly budget I see often with pre-retirees in Orange County:
| Category | Monthly Cost (OC) | Tier |
|---|---|---|
| Housing (PITI or rent) | $2,000–3,500 | Essential |
| Healthcare | $500–1,200 | Essential |
| Food & groceries | $600–900 | Essential |
| Transportation | $400–700 | Essential |
| Dining & entertainment | $400–800 | Discretionary |
| Travel | $300–1,000 | Discretionary |
| Total Range | $4,200–8,100/mo |
The Spending Smile
Research consistently shows that retiree spending follows a "smile" pattern: higher in early retirement (active years), lower in the middle (slowdown), then higher again in late retirement (healthcare). Planning for a flat spending rate misses this entirely.
The go-go years. Travel, hobbies, eating out, helping kids. Spending often runs 5–15% above the "average."
The slow-go years. Activity decreases, spending drops. Often the lowest-cost period.
The no-go years. Healthcare and potential long-term care costs spike. Make sure your plan accounts for this, even if it feels far away.
Don't ask "How much do I need?" Ask "How much do I want to spend — broken down by what's essential, what's flexible, and what's aspirational?" That conversation takes 30 minutes and gives you a real number to plan around.
Johnny Hong has helped hundreds of Orange County families retire with confidence. A focused 30-minute conversation can help you see your next best move clearly.