A Reddit user recently posted a question about retirement and lifestyle creep that raises some interesting questions. The Redditor said they’d be retiring next year at age 49 with $6.5 million in a diversified portfolio. They also explained they were likely to continue earning around $100,000 for another decade after retirement through consulting work. They were wondering if they’d end up with enough money and were concerned that their spending may have expanded too much as their earnings grew. 

While this poster has a much higher net-worth than most, the questions they are asking are relevant to everyone. Retiring without a plan to provide the lifestyle you want can be a major mistake, and so can expanding your spending too dramatically as your income grows.

So, how can this Reddit user — and others– make informed choices about these issues to avoid financial regrets?

How much is enough to retire?

The first big question this Reddit user should answer is whether the income their retirement nest egg will produce is going to give them the lifestyle they want — especially when they are retiring at such a young age. Leaving work at just 49 means your money will need to last for many more years than a typical retirement lasts. It also means that you’ll have years of private health insurance bills to cover before Medicare becomes available. 

Of course, with $6.5 million invested, the poster would have $240,500 to spend each year if they withdrew 3.7% of their account balance, which is the amount experts now recommend as a comfortable withdrawal rate. With income from consulting adding another $100K, they’d be looking at over $340,000 a year.

This sounds like a lot — and it objectively is. However, if the poster is used to making much more money than that, they may have spending commitments that require a higher income. Or, they may simply want to maintain a lifestyle that they have become accustomed to during their working years that requires more than that amount of income to maintain.

It doesn’t really matter if your nest egg produces an amount that most people think would be enough to live on comfortably. What matters is that it produces enough for your personal needs. The only way to know this is to draft a sample retirement budget and make sure that your nest egg will offer you enough money to cover your wants and needs at a safe withdrawal rate. If you discover that’s not the case, then you don’t really have enough for the retirement you deserve. 

Is lifestyle creep a problem?

The Reddit user’s second question had to do with how to distinguish between lifestyle creep and spending to live the life you want. This is also a common question most people must answer as their income goes up over time.

Obviously, when you start out working and aren’t making much money, you don’t have a lot to spend. You may have to drive a cheap used car, live with roommates, and buy from the discount grocers. As your income increases, you’re naturally going to want to upgrade your living standard — and there’s nothing wrong with that. However, many financial experts warn about lifestyle creep, or expanding your spending so much that you’re eating up all the extra income you’re earning. 

Lifestyle creep can be an issue if you’re letting your spending get out of control by increasing your expenditures so much you can’t afford to save or if you are making commitments that you can’t fulfill without being locked into a high-pressure lifestyle you may not want to continue forever. Since the Reddit poster has managed to amass a lot of savings and is considering retiring at a young age, these signs point to the fact that their lifestyle creep hasn’t gotten out of control to the point where it interferes with their security.

Ultimately, you need to balance improving your lifestyle as your income increases with accomplishing long-term financial goals. Working with a financial advisor can help you strike that balance so you can live a lifestyle that’s sustainable both while working and once you are retired. 

The Redditor in this case will need to decide if the $340K or so in income they’ll have is enough to retire comfortably with and, if not, if they want to scale down their lifestyle to a more manageable expense level or if they would prefer to keep working a little longer so they can continue living lavishly. There’s no wrong choice here, and it’s a decision only they can make. 

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