Budgeting after retirement is really no different in practice than pre-retirement budgeting. It is still a matter of determining your monthly income and expenses on a fixed and variable basis. The changes are in your income sources and your expenses.
Income.
There are several key post-retirement income sources. Unearned income could come from pensions, 401(k) accounts and IRAs. Social Security - based on your earnings or your spouse's, is another unearned income source, and there is income from non-retirement investments. You also may be working on a part-time basis.
Expenses.
On the expense side of the equation you probably no longer have a need for "business" clothes, and your commuting costs are gone. Some of the benefits you were granted as an employee are no longer there and now you must fund this yourself. Medical care is one of the biggest costs you could face in post-retirement years.
Some of the big questions you'll want to answer:
You are no longer tied to a geographic location because of a job. Is there a climate that better suits you? Do you want to be near children or grandchildren? Would moving to a less expensive area ease financial burdens during retirement?
You can begin taking Social Security benefits as early as age 62, but you are not required to take them until you reach age 70. By delaying, you can add to your benefit. The amount varies according to your birth year. Go to www.ssa.gov to learn what a delay might add.
More people are continuing to work following retirement. Do you want to change careers or perhaps keep a hand in your current field by working part-time? Your decision could affect more than your earned income. Your Social Security benefits will be reduced if your earnings exceed certain limits. These limits change annually. Ask Social Security for the fact sheet, Update to get the current limit.
By planning ahead, you can significantly reduce your retirement expenses without changing your lifestyle. Consider, for example, adding to your monthly mortgage payment during the years you are working. This could mean no mortgage by the time you retire. And, if you are looking at buying a new car or doing major house repairs, do them while you are working. Then you won't have to think about these expenses for years. Also, it pays to investigate discounts offered to people over 50 years old.
If you haven't already done so, take a look at your insurance needs. Do you have the right life insurance? Does your medial insurance carryover into retirement? Do you need a policy to supplement Medicare benefits? Should you be considering a long term care policy? Click here to learn more about insurance options. Or call us at 1-800-392-3009 to schedule an appointment with a Financial Advisor.
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