Your retirement-budget is a road map to your future. There will be detours and rough pavement along the way. An effective retirement-budget will help to anticipate and make adjustments for those contingencies.
The preparation of your budget must be based on the best and up to date information available, the services of a professional financial consultant are recommended. Your consultant can provide advice on optimization of social security and tax advice. He or she can also assist in your estate planning.
The retirement budget should include all anticipated income and expense items. If there is still a mortgage on your home, pay it off as soon as possible to cut down on retirement expenses. Be realistic about your retirement needs and set goals. Social security income is the floor. Add income layers if possible to meet projected expenses.
These income layers could be funded by a post retirement job of some kind, retirement annuities, a retirement business, and/or a reverse mortgage. These options should be discussed with your financial consultant and tailored to your specific needs.
The budget should include a line item for continued saving for future investment. Saving is always tough and if you are like most of us, it will be even tougher when you have left your career. Saving and reinvesting part of your income could help offset erosion by inflation. It would also provide a way to help in funding unforeseen contingencies
In our case, my wife’s social security income is direct deposited in a savings account. That savings account is in a separate bank making it inconvenient for us to access. The money saved is accumulating for reinvestment or the purchase of additional annuities. The purpose is to enable us to increase monthly cash flow as needed to meet inflationary pressure.
Preparing the expense budget can be greatly enhanced by good personal accounting software such as “Quicken” or “Money.” Start with an assessment of your current financial needs and levels of spending.
Critically review each line item. Is it necessary and if it is can you do with less. My advice is to not include savings in your expense budget but as a debit to your income – out site out of mind. :)
Remember that our retirement lifestyle should ideally provide a balance of relaxation, fun, recreation, service to others and stimulating work. Be sure to address your recreational needs in your expense budget including an occasional weekend getaway.
The expense budget could include at a minimum:
Review the budget monthly against actual expenses. Plan for seasonal changes in expenses such as electric utility costs spiking in the summer.
Nothing seems to stay the same. Since change is a fact of life, your budget should be reviewed at least annually with your financial consultant.
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