Start with the rule everyone quotes, because it is the one you should be most skeptical of. The idea that you will need 70 to 80 percent of your pre-retirement income rests on the observation that some expenses fall when you stop working — you are no longer saving for retirement, payroll taxes drop, the commuting and work-wardrobe costs disappear, and the mortgage may be gone. All of that is true for some people and irrelevant for others. A couple who retires with a paid-off house and modest tastes might thrive on 60 percent. A couple who finally has time to travel, renovate, and spoil grandchildren might spend more in their first few retirement years than they did while working. A single percentage cannot capture that.

The federal numbers give a firmer floor. According to the Bureau of Labor Statistics Consumer Expenditure Survey, households headed by someone 65 or older spend on the order of $50,000 to $60,000 a year. Housing is the largest category by far — around $20,000 a year, or roughly a third of the budget — followed by transportation, food, and health care. It is worth remembering these are averages across households of about 1.7 people, so a couple in a higher-cost metro should expect to land above the midpoint, and a single retiree below it.

The more useful insight is that spending is not flat. The researcher Michael Stensland popularized the phrase the retirement spending smile, and it matches what advisors see in real client accounts. In the first decade of retirement — call it the go-go years — spending often runs high. You are healthy, energetic, and finally have the time to do the things a working calendar never allowed. Then comes a long middle stretch, the slow-go years, where travel tapers, the house is paid off, and spending drifts down in real terms. Then, late in life, the no-go years, spending can spike again, but for a different reason: health care and long-term care.

That late-life health-care bill is the part most budgets underweight. Fidelity's frequently cited research estimates that an average 65-year-old couple retiring today will spend roughly $330,000 on health care over the remainder of their lives — and that figure does not include long-term care, which is a separate and potentially much larger risk. A single year in a private nursing-home room can run well over six figures in many parts of the country. You do not budget for that with a line item; you budget for it with a plan, whether that is insurance, earmarked assets, or home equity.

Inflation quietly reshapes all of this. A budget of $60,000 today, growing at just 3 percent a year, becomes about $108,000 in 20 years to buy the very same basket of goods. That is why retirement spending has to be planned in real terms, not nominal — the question is not what you spend in year one, but whether your income can keep pace with prices for 30 years. The 2026 Social Security cost-of-living adjustment of 2.8 percent helps on the benefit side, but it only covers the portion of your spending that Social Security funds.

Taxes are spending too, and retirees routinely forget to budget for them. The dollars you pull from a traditional 401(k) or IRA are taxed as ordinary income, which means a $70,000 lifestyle might require $80,000 or more of gross withdrawals depending on your bracket and state. A retiree in Arizona, with its 2.5 percent flat income tax and no tax on Social Security, will keep more of each dollar than one in a high-tax state — but the federal bill applies everywhere. Building the tax line into the budget is the difference between a plan that works on paper and one that works in your checking account.

So how do you actually pin down your number? The most reliable method is not a formula — it is your own bank and credit-card statements. Pull the last 12 months, strip out the items that genuinely end at retirement (retirement-plan contributions, payroll taxes, work expenses, and the mortgage if it will be paid off), then add back the things that grow: more travel early on, the full cost of health insurance before Medicare if you retire before 65, and a realistic health-care reserve for later. That bottom-up number, built from how you actually live, beats any top-down percentage every time.

Build your retirement budget from your real spending, not a rule of thumb. Twelve months of statements, adjusted for what ends and what grows, will get you closer to the truth than 80 percent of anything. Then pressure-test it against the spending smile — plan for higher outflows in the first decade and a health-care surge in the last.

Separate essential spending from discretionary spending. The essentials — housing, food, insurance, utilities, taxes — are what your guaranteed income (Social Security, any pension, possibly an annuity) should cover. The discretionary layer — travel, gifts, hobbies — is what a flexible portfolio funds, and it is also the lever you can pull back in a bad market year, which is precisely what makes a plan resilient.

Do not forget that taxes and inflation are line items. A withdrawal strategy that ignores the tax cost of pulling from pre-tax accounts, or a budget that assumes today's prices hold for 30 years, will quietly run short. The number that matters is after-tax and inflation-adjusted.

• Anchoring to the 80% replacement rule instead of building the budget from actual spending. The rule is a screening tool, not a plan.
• Assuming spending stays flat. Front-loaded travel and back-loaded health care mean a level projection understates the early and late years.
• Underbudgeting health care and ignoring long-term care entirely — the single biggest source of late-retirement budget shock.
• Forgetting taxes. Gross withdrawals from pre-tax accounts have to exceed your spending number to net what you actually need.
• Planning in today's dollars and never accounting for 25 to 30 years of inflation eroding the budget.