How to Live Within Your Means in Retirement

By Tracy Wells, Investment Advisor Representative

August 31, 2016

Looking back over advice I’ve given clients and blogs that I’ve written for our website, I realize there are a few topics that keep rising to the top.  Call me crazy, but I really like educating people on retirement planning, especially Social Security benefits and budgeting.  I am a planner! Sometimes to a fault!  Dinner menus, calendar, to do list, home projects, budget, etc., I am a planner.  (Fortunately I married Mr. Spontaneous…so we do have a healthy balance at home!)

So let me take a few minutes to remind you that having a retirement plan is helpful.  We know that most things don’t happen exactly as planned, but it gives you a starting point.  So as you plan for retirement, it is important to begin by projecting what your fixed income will be.  Fixed income may include Social Security benefits, pensions, Required Minimum Distributions (RMDs) from your IRAs, etc.  Once we know this, we can look at options like maxing out your contribution to your retirement plan, working an extra year or two, and/or the best strategy to max out your benefits from Social Security.  These options to save now can impact what you will have available to spend in the future.    

Next we review your current expenses.  How much do you spend on fixed expenses?  How much on discretionary spending?  Will you change your spending habits in retirement?  (I.E. instead of getting your health insurance through your employer, you will probably have to fund Medicare Part B, Supplement or Advantage Plan, and Part D.)

Whether you are planning for retirement or fresh out of college, there are still budgeting basics.  Start with your fixed expenses, then determine what is left for discretionary spending.   Your fixed expenses include essentials, such as mortgage or rent, utilities, groceries, transportation, insurance, etc.  Your discretionary spending includes eating out, travel, clothing allowance, hobbies, etc.  

As I’ve worked with people to draft a budget, they often ask me to tell them what to do, maybe pinpoint  places where they can cut.  But here’s what I’ve learned over the years…I can’t!  I can help set parameters and basics for a budget, but living within their means ultimately comes down to them and their priorities!  

Living within your means might require you to shop differently, use coupons or frequent different stores.  Living within your means might force you to choose between a new vehicle in your garage or that Alaskan cruise you want to take.  Living within your means might also include a shopping spree or eating out.  You’ve probably heard it said that you can tell someone’s priorities by looking at their bank transactions and calendar!

As you plan for your retirement, strive to look at your goals, dreams and priorities.  There will always be unknowns, like what Medicare will cost in 3 to 5 years or if you will need long-term care.   But the good news is you can review your retirement plan and budget on a regular basis and tweak things as needed.  

If you need help in creating a personal retirement plan, please don’t hesitate to contact us.

Keywords: budget, retirement
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