Making a Budget for Retirement

By Drew Jones

April 5, 2019

Are you close to retirement or at least can see it getting closer on the horizon? If so, thumbs up to you! Retirement is a significant achievement but also one of the most common. Yet, sometimes the most overlooked questions we get are regarding budgets. Nonetheless, as you get closer to bidding adieu to your working career, or if that date is already in the rearview mirror, having a good idea of what you spend is extremely important to the overall success of your plan. Making a budget for retirement is important, so you make sure you don’t outlive your money especially since your source of income will typically come from investments, savings, Social Security, etc. rather than a regular paycheck.

Spending in Your Budget for Retirement

Making a Budget for Retirement - financial papers and a calculator on a desk

Budget for Retirement by Identifying Needs and Wants

When making a budget for retirement, first of all, it might help to look at expenditures and divide them into two different categories; needs (something you have to have) and wants (something you would like to have). Some examples of needs would be housing, food, health care, transportation, and personal/property insurance needs. Examples of wants might be personal care (clothing, products, etc.) entertainment, travel/vacation, hobbies, gifts, education, charitable contributions. It might help to write them out on a sheet of paper or create a spreadsheet.

Determine Your Monthly Expenses for Your Budget for Retirement

The next step in making a budget for retirement is to determine what bills are paid via checking account, credit card, or other forms of payments. From there you can look back and add up the total spent for the year for each category. Remember, you will probably have some one-off items like home property tax. In this example, take the yearly amount and divide by 12 to come up with a monthly cost.

Use Budgeting Tools

Need some help? There are numerous budgeting tools available to take some of the hassles out of looking at past spending and monitor current expenditures. You can purchase tools like Quicken where you can link your accounts and it will attempt to put them in a category. There are also some well known free tools like Mint, YNAB (You Need A Budget), just to name a few.

Once you know what you’re spending, you can review your needs and wants list and make some decisions. Remember, don’t throw this list away. This will become useful in the future should you need to cut back on spending. With this list, you can then prioritize and, consequently, have meaningful discussions on any tradeoffs that may need to be made, while always trying to maintain your needs.

We also have some resources to help you prepare for retirement such as our Retirement Plan Checklist and 41 Frequently Asked Questions About Retirement. These resources won’t help you make your budget for retirement. However, they can help you get an idea of what is important in order to properly prepare yourself for life after your career ends.

If you have questions about budgeting for retirement or how you can achieve your long-term financial goals, fill out the form below or give us a call at 913-393-1000. We’re always ready to start the conversation with you and guide you toward your one best financial life.

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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.