June 19, 2025 The Beacon • 45
Helpful tips will guide you in how to budget for retirement
After what feels like a lifetime in the workforce, retirement is a welcome change for many individuals. Upon retiring, people often engage in hobbies they may have previously relegated to the back burner. Travel opportunities increase in retirement, and retirees may live more relaxed and less stressful lives.
Stress stemming from a looming retirement can creep up for those people who have not taken the time to account for how their finances will change once they’ re no longer working. Without a consistent salary or other income coming in, retirees may have to change their habits and spending accordingly. This is particularly true for those who did not sock away enough in retirement savings.
The key to enjoying retirement is creating a retirement budget and sticking to it. Budgeting sets retirees up for more enjoyable golden years. The following are a few steps to creating a retirement budget.
— Add up all of your income. As retirement
File Retirement is something everyone looks forward to, especially if they practice careful budgeting nears, it can be helpful to sit down with a financial professional and calculate all of the income streams that ultimately will be replacing your paycheck. These include Social Security benefits, tax-advantaged retirement accounts like IRAs and 401( k) s, pensions, taxable investments, and even part-time earnings. This will give you a picture of projected income, which can be divided by the number of years you expect to spend in retirement.
— Figure out your mandatory expenses. Charles Schwab suggests considering the spending items that you will really need in retirement. These can include housing, utilities, clothing, medical insurance costs, and transportation. These needs may change through the years, so the budget can be reevaluated each year.
— Calculate any discretionary expenses. Spending that falls in the“ want” territory may include travel, hobbies, gifting family members like grandchildren, and any big purchases like a boat or vacation timeshare.
— Consider expenses that may go up. While certain expenses may go down, like commuting costs, grocery bills, and expenses related to children, bills for utilities, recreation, property taxes, and more likely will increase through the years.
— Compare projected income against projected expenses and see where the chips fall. If you find that income streams fall short, you may have to adjust investments before your retirement or you may have to take a part-time job after retirement. Sometimes spouses may not be able to retire at the same time if one person’ s salary will be needed to continue covering all expenses.
— Don’ t overlook health care. Although you may be covered by Medicare and an insurance plan from a former employer, supplemental premiums and out-of-pocket costs may continue to rise during retirement. According to the 2024 Fidelity Retiree Health Care Cost Estimate, on average, a 65-year-old person may
need $ 165,000 in aftertax savings to cover health care expenses.
Retirement comes with exciting prospects, and careful budgeting for the days when you aren’ t working can make for a more enjoyable post-work life.
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BASICS
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more than half of respondents( 52 percent) with higher financial literacy calculated their retirement savings needs, an important step that fewer than one in three( 29 percent) with lower literacy levels had taken.
What are some additional benefits of financial literacy?
Individuals are often confronted with a host of options when making financial decisions. That includes choices regarding bank accounts and credit cards, which are two variables related
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to financial literacy that individuals encounter every day. Individuals with |
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financial literacy can pick a bank account that most suits their needs, whether
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Developing a financial safety net requires a measure of financial literacy that anyone can nurture.
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that’ s standard accounts like checking and savings or something more unique like a high-yield savings account. Knowledge of financial basics also can prepare individuals to choose the right credit card, which can be a more difficult decision than choosing a bank account given the number of different cards available. Low-APR, no-APR, travel rewards, cash-back cards, and balance transfer cards are some of the options consumers can choose from when picking a credit card. Financial literacy increases the chances consumers pick the card that best suits their short- |
and long-term needs.
Financial literacy can help people navigate challenges that periodically arise during the course
of everyone’ s life. Taking time to learn some financial basics can set people up for long-term economic health.
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