To figure out how much you need in retirement, start with your current monthly spending as a baseline. Include essentials like:

• Housing costs, groceries, utilities, and transportation.
• Lifestyle expenses such as entertainment, hobbies, and travel. 
• And healthcare, which deserves special attention since costs typically increase with age.

Above all, your retirement budget needs flexibility built into it. Many people underestimate their retirement expenses by focusing only on basic needs, but life presents unexpected costs. Think about potential home repairs, replacing vehicles, or helping family members financially.

A more realistic approach includes planning for necessities and the activities that make retirement enjoyable. Most people find their retirement spending exceeds their current expenses, especially in the early years when they’re healthy and active enough to pursue dreams like extended travel or starting new hobbies. You’ll have to factor this into retirement savings, of course.

This is why tracking your expenses now gives you invaluable data for future planning; you can better predict and adjust for tomorrow’s needs. Remember that your spending will likely shift in retirement. Some costs, like commuting expenses or work clothes, might decrease while others, like healthcare and leisure activities, typically increase.