It may seem like retirement is many years out in the future. I used to think so, as well, but then I realized it really isn’t that far away and that I need to make plans for my retirement budget. You see we often put off those things we dread and retirement planning can often fall into that category.
To make things less painful, why not get a head start while time is on your side? There is no better day than today to begin considering your retirement options. Take a few minutes to sit down and make a list of how you would like to see yourself living in retirement. List any expenses you think you would have along with your income. Now this is where reality sets in. What will your income be in retirement? Have you ever really considered that question before? Be realistic and make an educated estimate as to the income. In addition, will there be other expenses you don’t currently have that you will need to consider in the budget? I am sure there will be and there are certainly expenses now you may not have in retirement such as the cost of work clothes and commuting expenses to name a few. Seriously consider all that you can think of to include in the retirement budget.
Below are a few steps to help you get started down the retirement budgeting path:
Step 1: a) Create a list of all the expenses you cannot change which we call fixed
expenses. No matter where you live in retirement you will need to
consider utilities, insurance, taxes, etc., that you will continue to pay
b) List categories for food, clothing, transportation, medication and any
other items you will need for retirement. These will differ based on your
c) Consider all the expenses you currently pay for that you feel are
necessities and decide whether or not your quality of life will change if
you do away with them in retirement.
Step 2: Consider the rising costs of certain expenses and make necessary
adjustments. For example, insurance continue to rise. Your medical costs
may be greater in your retirement years as health begins to decline. Will
you need to add an expense for medication or increase your current
spending in that area?
Build in the cost for inflation in your retirement budget. Even though you
may currently spend $150 a month on food, the costs may increase and you
may have to spend $200 twenty years from now to purchase the same amount
Step 3: Don’t forget to include entertainment costs in the budget. I know that my
husband and I want to be able to travel and attend events in retirement
so we will include those costs in our retirement budget. We will also need to
consider additional costs of visiting our family if they move away.
Don’t let retirement take you by surprise. By paying attention to the retirement budget now and making a plan, you will be better prepared to face and enjoy those retirement years instead of worrying if you will have enough money to cover your expenses. It’s a smart move to make. Your future self will thank you.