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Creating A Retirement Budget That Works


If you are nearing retirement, many decisions are coming your way, from where you will live, to how you will fill your suddenly idle hours. One of the most critical retirement decisions involves your finances.

Without a steady paycheck, you will be responsible for creating an income that will sustain your lifestyle. As crucial as budgeting was during your working years, having a sensible spending plan will be even more critical as you move through retirement. Here are tips to help create and follow a retirement budget that works.

Forget The 80% Spending Rule
The much-touted 80% rule is more of a guideline than a prediction. You might indeed spend 80% as much as you did when working, but you could need more or less depending on your retirement lifestyle. It is best to develop a customized spending plan for your unique retirement goals.

Research Your Guaranteed Sources Of Income
Guaranteed income will play a key role in your retirement budget, and now is the time to map out your Social Security payments, pensions, and other steady sources of cash.

Estimate your investment income.
Now is the time to check out your investment income, from capital gains on your mutual funds and dividends on your stock holdings to interest on savings accounts and certificates of deposit. Use tax returns to estimate this income, or go online to look at your brokerage statements.

Track Your Current Spending
Knowing how much you are currently spending will give you a baseline, so grab your statements and start going through your bills. To make this easier to track, use a budget. Take the guesswork and uncertainty out of budgeting with our free, easy-use, interactive budgeting tool. You’ll be surprised just how easy and effective it is.

Adjust Your Spending Estimates Based On Your Post-Work Priorities
Now that you have a baseline, you can adjust based on your retirement lifestyle. For example, those bills for work clothes and commuting will go away, but costs for things like hobbies and travel are likely to go up.

Conduct A Trial Run
It never hurts to try out retirement before you leave work. Set aside your estimated monthly income, including what you expect to get from Social Security and future pensions, then live on those amounts for a couple of months.

Make Adjustments As Needed
If your trial runs smoothly, you do not need to do another thing. However, if not, it is time to make some adjustments and potentially consider steps before you retire to bolster your finances. These could include as a good first step, scheduling a Financial Wellness Check with the Credit Union. This free, no-strings review of your finances will identify low-hanging opportunities to earn more and avoid potentially damaging financial pitfalls. It’s easy and can be done over the phone or in person.

Pay Careful Attention To Spending, Especially Early In Retirement
Spending too much in the early years could reduce your options later, so watch your budget carefully.

Conduct A New Analysis Every Year
It is important to track all your sources of income, and all your investments, on an ongoing basis. That means calculating your net worth on an annual basis and reviewing your retirement budget accordingly.

Make Adjustments Based On The Results Of Your Analysis
If you want to enjoy a financially secure retirement, you need to build flexibility into your plan. That means making adjustments based on your current circumstances and changing the structures of your budget as you go along.

Your retirement should include fun, relaxation, and adventure, not financial stress. If you want to enjoy your post-work years, you need to create a budget that works for you, flexible enough to change with your needs but robust enough to see you through all the years of your retirement. The tips listed above can help you get started to walk away from work with confidence and never look back.

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