costr

CoSTR stands for Cost of Staying in Retirement. It is a financial planning concept that aims to estimate the annual expenses an individual or couple will need to cover their living costs once they have stopped working and are living solely on their retirement income. This figure is crucial for determining how much savings and investment are required to maintain a desired lifestyle throughout retirement.

Calculating CoSTR involves a detailed assessment of projected expenses in retirement. This typically includes essential needs such as housing, healthcare, food, and transportation. It also accounts for discretionary spending like travel, hobbies, entertainment, and gifts. Adjustments are often made for inflation, as the cost of living is expected to rise over time, and for potential changes in lifestyle that might occur in retirement.

The purpose of estimating CoSTR is to inform retirement savings goals. By understanding the potential annual cost of retirement, individuals can work backward to determine the total nest egg needed to generate that income through investments, pensions, or other retirement resources. It helps in setting realistic savings targets and developing an effective investment strategy to ensure financial security during the retirement years. Tools and calculators are often used to assist individuals in estimating their CoSTR.