Money in retirement isn’t just about having enough saved up – it’s about knowing exactly how to use what you’ve got. Most folks I talk to get overwhelmed trying to figure out their retirement budget. They either end up with a spreadsheet that looks like it could launch a rocket ship, or they wing it and hope for the best. Neither approach gets you where you need to go.
The truth is, creating a retirement budget shouldn’t give you a headache. Think of it like planning a really long vacation – you need to know what you want to do, what it’ll cost, and how you’ll pay for it. Let’s break this down into something that actually makes sense and helps you live the retirement you’ve worked so hard for.
Understanding Your New Financial Reality
The shift from earning a paycheck to living off your savings changes everything about how you handle money. Your monthly expenses will likely change – some might go down (like commuting costs), while others could climb (hello, healthcare). Start by taking a hard look at your current spending. Write down everything you spend money on now, then think about what might change when you retire.
Fixed expenses like your mortgage, property taxes, and insurance premiums need special attention. These form the foundation of your retirement budget. Next, consider variable expenses like groceries, utilities, and entertainment. Don’t forget about periodic expenses that pop up throughout the year, like car maintenance or holiday gifts.
Essential Categories for Your Retirement Budget
- Basic Living Expenses
Your home remains one of your biggest expenses in retirement. Beyond the mortgage, factor in property taxes, insurance, utilities, and maintenance. These costs tend to increase over time, so build in some wiggle room. Regular home maintenance helps avoid expensive surprises down the road. Pay close attention to the expenses which rise with inflation (like groceries) , and which expenses stay the same (like a fixed mortgage).
- Healthcare Costs
Healthcare deserves its own category because it often becomes your biggest expense in retirement. Medicare helps, but it doesn’t cover everything. Plan for supplemental insurance, prescription drugs, and out-of-pocket costs. Consider setting aside money for potential long-term care needs, or investing in insurance depending on your personal health factors
- Lifestyle Choices
This category covers the fun stuff – travel, hobbies, dining out, and entertainment. Be realistic about what you want to do in retirement and what it will cost. Many retirees spend more in their early retirement years when they’re more active, then naturally slow down their spending as they age.
Making Your Budget Work
- The 80% Rule Isn’t Always Right
You’ve probably heard you need about 80% of your pre-retirement income to maintain your lifestyle. That’s not always true. Some people need more, others less. Your retirement budget should reflect your actual plans, not a generic rule of thumb.
- Build in Flexibility
Life throws curveballs, even in retirement. Your budget needs some flexibility to handle unexpected expenses or changes in your situation. Consider keeping a separate emergency fund just for these occasions. This gives you peace of mind and helps avoid dipping into your regular retirement income.
- Review and Adjust
Your retirement budget isn’t set in stone. Plan to review it regularly – at least once a year. Look at what’s working and what isn’t. Are you spending more or less than you planned in certain categories? Make adjustments as needed to keep your financial plan on track.
Work With Us
Creating a retirement budget that actually works takes more than just crunching numbers – it requires understanding your unique situation, goals, and concerns. The right budget brings clarity to your retirement planning and helps ensure your money supports the lifestyle you want.
At True Life, we help you create a retirement budget that makes sense for your life. Our SIG Strategy focuses first on Safety, then on increasing Income to match inflation, and finally on Growth to maintain your purchasing power. We don’t just hand you a complicated spreadsheet and send you on your way. Instead, we work together to create a clear, one-page plan that you can actually understand and use. Ready to get started? Let’s talk about building a retirement budget that works for you. Schedule your free consultation today and take the first step toward retirement clarity.