Planning Your Retirement Budget (2 min. read)

For those on the cusp of retirement, or forced into earlier-than-expected retirement, you may have done some numbers in your head to figure out whether you will have “enough” saved and coming in (from Social Security, a pension, your 401K, or passive investments) to last through the golden years.

According to the U.S. Census for 2021, the average age of retirement for men in the U.S. is 65, and for women, 62. The statistics vary from source to source, some say the average retirement age is 66.

With people living longer due to healthier lifestyles, the average length of retirement is 20 or more years. If you feel your “plan” needs a definitive budget, calculate your income as well as expenses to get more clarity and the peace of mind it can bring.  Here is a simple financial calculator to help you estimate how much you should saving:

Some retirement calculators will take inflation into account and include default assumptions about rates of return on your investments and savings prior to and during retirement. Typically, these assumptions would be a 2-3% inflation rate, and a 5-6% rate of return.  Calculator tools will often assume you would need 70% to 80% of your current income to continue in the lifestyle you have as you enter retirement. Talk to one of our advisors to discover how realistic these are in today’s financial environment, and to apply them to your situation.

Bear in mind that your retirement lifestyle will have everything to do with your costs. For example, you might be planning a simple, downsized retirement with your home and car paid off and your enjoyment stemming from cooking at home, walks and grandkids. Or, your dream may be to travel internationally, and to enjoy golf, a second home and fine dining and wines.  Some folks enjoy continuing to work because they really like it. Factor in contemplated major lifestyle changes, especially those that are costly.

A budget overview for your retirement should include these expense categories:

  • Housing – includes basic outlay, upkeep, utilities, insurance and furniture.
  • Transportation – gas, insurance and maintenance, air fares.
  • Healthcare – spending usually increases during retirement and there’s long-term care to consider.
  • Food, both groceries and dining out.
  • Cash outlays such as charitable, support or alimony payments.
  • Other – could be hobbies, books, alcohol.                                                                                                                                                                  

There are many budgeting tools and applications available for free online. The process to fill these out can be cumbersome and time consuming, but if you take time to prepare these estimates it will greatly benefit you moving forward.

Many people fear running out of money in retirement, but you can take action to keep fear at bay. If you see issues you can look for ways to increase your income and start saving more now. Or think about taking on a job in retirement or selling a large asset you no longer need.

Try and test drive your plans while you are still working, and if you find you’ve overlooked something, go back, and see where you can adjust. We’re here to help if you need us.


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