You'll be withdrawing money from your retirement accounts, rather than accumulating, so you'll probably need to reallocate some of your assets to investments designed to meet your short-term needs. But some of your needs are still very long-term, maybe 20 years or more, so you needn't entirely abandon your long-term investment approach.

Balancing your risk tolerance and your future needs
Sometimes retirees become risk averse. Without a steady income from a job, they worry that their nest egg will erode unexpectedly, and they react by seeking very low-risk investments.

Before you change the overall mix of your portfolio, remember that your goal during retirement is to maintain your financial independence for your entire lifetime. This means inflation is your enemy, and your investment strategy should be designed to at least outpace inflation, if not continue to build your nest egg.

Choosing your retirement lifestyle
You'll still need a budget during retirement. To estimate what your monthly expenses will be, choose the lifestyle you want to live and then make cost estimates.

If you plan to continue living your current lifestyle, a rule-of-thumb estimate is 80% of your current expenses. This estimate is based on the assumption that your cost of living will drop when you no longer have work-related expenses such as commuting costs, dry cleaning, and restaurant lunches.

Many financial professionals suggest, however, that you plan to maintain 100% of your current costs, or more. Some retirees will actually need more money because they plan to travel, play extra rounds of golf, or participate in other expensive recreation. Also, keep in mind the escalating costs of health care.

The choice is personal, but you'll need a budget to keep from spending too much of your accumulated wealth too quickly.

If you determine that your retirement income will not support the lifestyle you have chosen, you may need to make some adjustments. Many retirees plan to supplement their retirement incomes by working part time or turning a hobby into a small business. If your nest egg appears to be a little short, the best time to find out is when you still have time to add supplemental income or even decide to work full time for an additional five years to help provide a budget cushion.

Adding to your life expectancy
Life expectancy depends on a lot of factors, including the state of your health, heredity, and even luck. Taking all of this into consideration, you'll need to estimate how many years you'll need to budget for. Your goal is to maintain your financial independence, so the best approach may be planning for an exceptionally lengthy retirement.