You’re finally ready to enjoy that dream retirement you’ve been working toward for years. You dreamed. You created a plan and worked toward your goal with real effort, and you got real results. You’ve finally reached that financial number you needed so you could retire. Now it’s time to coast and enjoy the good life, right?
If you aren’t careful, you’ll buy into a myth that could destroy your dream retirement—the idea that you don’t have to budget in retirement. It’s not only flat-out wrong, but it’s also dangerous.
Why Budget in Retirement?
Even if you’re house is paid off and you’re totally debt-free, you have to make and follow a monthly budget in retirement because you still have bills! Just because you retire doesn’t mean your financial responsibilities magically disappear. Here are a few of the costs you’ll need to think about:
- Homeowners’ insurance
- House repair (the plumbing may leak!)
- Property taxes
- Utilities (gas, electric, etc.)
- Car replacement (you do want to keep driving, don’t you?)
- Car insurance
- Charitable giving
- Special events (birthdays, Christmas, graduation, etc.)
- Keeping your emergency fund fully funded
If you don’t create a monthly spending plan during your retirement years, your nest egg could disappear overnight and you could be back where you started—punching a time clock. Keep in mind, your budget will likely change when you retire. You may need less money in gas because you won’t drive to work, but your healthcare costs are likely to creep higher. Some experts say to budget $11,000 a year for healthcare in retirement. That’s more than $900 a month! You may not need that much now, but as you get older, costs will increase significantly.
At the same time, other costs may go down, like when eating out or going to a movie. I’m going to take advantage of my senior discount wherever I can! Once you make your budget each month, you have to stick with it. Every month. No excuses.
One More Thing . . .
Even in retirement, you need to meet with a professional investment advisor frequently to look over your numbers and make adjustments to your spending and saving. That advisor can also help determine how and when you can take money from your investments without incurring a penalty. If you withdraw cash before a certain age, it could cost you thousands of dollars! If you don’t have a professional retirement professional you can trust, you can find one through our network of investing Endorsed Local Providers (ELPs).
In retirement, you have to stay vigilant and intentional with your money. You must create a budget to tell your money where to go every month. If you don’t, you’re one bad financial decision away from going to work instead of going on that dream trip!