How Your Budgeting Needs Change During Your Retirement

How Your Budgeting Needs Change During Your Retirement

As you transition from the accumulation phase of your life – your working years when you save money for the future – to your retirement phase, it is important to think about your short- and long-term budget needs. You might factor in expenses like your mortgage, utilities, food, and medical expenses to determine how much money you will need each month when you retire. While this strategy may give you a good idea of what your monthly expenses will be, it does not always tell the whole story. At Crash Proof Retirement, we want to encourage you to consider how your budgeting needs may change over the course of your retirement so you can be proactive and prepared.

Budgeting for Your Early Retirement Years

After decades of working diligently to build up your nest egg, transitioning to the retirement phase of your life means that you are going to finally live off the money that took you decades to save up for retirement. After making the transition, you might take a vacation that you were putting off, pursue a new hobby, or check some other items off your bucket list. While this is a well-deserved reward for all your hard work, it can also be expensive. If you do not factor these important future expenses into your budget appropriately, you may find yourself coming up short later in retirement.

Budgeting for Your Later Retirement Years

Data from the Bureau of Labor Statistics shows that Americans generally spend less the longer they make it into their retirement years. While the average spending of households in the accumulation phase is about $60,000 per year, that number drops to about $45,000 once they reach age 65. In late retirement, average spending is about 41% less than during their peak spending years. After age 80, entertainment and travel expenses decrease significantly, as their spending focus generally shifts to food and medical expenses.

The most expensive medical costs are associated with long-term care, which presents the biggest threat to a retiree’s financial stability today. Around 70% of people over age 65 will need long term care at some point, for an average of three years, and this type of care does not come cheap. According to a study by Genworth Financial, the cost of staying in a facility that provides skilled medical care can be as much as $100,000 per year or more, depending on where you live. If you have not planned for long-term care expenses, skilled medical care can bankrupt your retirement savings and leave you in poverty.

Planning a Budget for Your Whole Retirement

If you want to be sure your retirement savings will cover all of your expenses, now is the time to be proactive and prepared. We encourage you to think about how your spending needs will change over time and to make note of your short- and long-term expectations. While you do not necessarily have to avoid expenses like travel and entertainment early in retirement, it is a good idea to moderate your spending and develop a plan early on for long-term care expenses. You can learn more about how to prepare a proper budget during each retirement phase by reading “Adjusting Your Retirement Strategy as You Age.” 

At Crash Proof Retirement, we have helped thousands of retirees around the country achieve a secure financial future by educating them about budgeting, long-term care expenses, and retirement investments that exist outside of the risk-based securities industry. If you in or near retirement, investing your money in risky vehicles like stocks, bonds, and mutual funds could turn your retired years back into working years. Since stocks, bonds, and mutual funds are tied to the performance of the stock market, a crash could erase years of gains and rob you of your principal investment forever. 

Our team of licensed educators at Crash Proof Retirement can help educate you about proprietary investments that are based in the financial life insurance industry that are not only guaranteed to protect your principal in a stock market crash, but also allow you to credit interest at rates comparable to securities-based investments. Call 1-800-722-9728 if you need retirement advice in Upper Darby, or anywhere nearby, or fill out the online form on our contact page to schedule your no cost appointment today to learn more about how the exclusive Crash Proof Retirement System can help you achieve peace of mind.