6 Areas of Consideration for a Retirement Budget

It is relatively simple nowadays to quickly become overwhelmed when researching retirement planning and options. There are many areas to consider within retirement planning, including investment funds, Medicare costs, social security, living expenses, and more. Where do you begin? Ultimately, regardless of your current age or stage in retirement planning, your first step should always be creating a budget.

Defining your retirement budget early in your planning is essential. It will determine how much and how aggressively you need to invest. When calculated conservatively, your retirement budget can also cover unexpected costs that may arrive while keeping your dream retirement on track. Without detailed consideration, you risk outliving your savings, being forced to live a retirement opposite of what you hoped, or you risk having to go back to work.  Although we can’t predict the future, your retirement budget and savings goals will fund your passions and your unexpected expenses with proper planning and goal setting.

There are six areas to consider when creating a retirement budget:

  1. Current expenses

Creating a budget starts with figuring out your current cost of living. Gather your bills and expenses from the last 3 to 6 months and tally them up. Don’t forget to include the extra spending such as groceries, subscriptions, gas, etc.

  1. Ideal lifestyle

Then consider the type of retirement you want to live. Are you going to travel? Do you plan on moving to a community? Don’t hold back!

  1. Retirement age

At what age do you want to retire? Your current age and ideal lifestyle in retirement may impact this number. The average American retires around 65 years old and spends approximately 20 years in retirement.

  1. Longevity/Health

How long do you plan on living in retirement? Thinking of your longevity is a little odd; however, it's vital to consider in order to appropriately determine how many years your retirement fund needs to support you. Do you plan on retiring at 60 and living until your 100? That's 40 years of expenses you'll need to have in your retirement fund. Perhaps you aren't expecting to live past 85, and your retiring at 70, you'll need 15 years' worth of living expenses. This is also the time to consider health care costs, expected and unexpected.

  1. Additional Income

Yes, "retirement" means you are no longer working 8+ hours a day; however, some individuals enjoy staying busy. Are you considering a part-time job in retirement? Remember, there isn't a right answer. It's what fits your ideal lifestyle. This is also where you should consider Social Security benefits.  Deferring Social Security to the age of 70 will automatically increase your monthly income. 

  1. Inflation

 Calculate a 3-5% inflation rate to cover increased costs of living. This will provide padding to help reduce the risk of running out of savings. An inflation rate of 3% will erode the value of your savings by 50% over approximately 24 years.

This budget will now be the driver of your planning decisions moving forward. Based on this you can find the best investment options and retirement plans that will ensure a high quality of life during your golden years. Twin Lakes Community in Burlington, North Carolina, has been the retirement destination of choice of thousands of retirees from across the country. As a Continuing Care Retirement Community, Twin Lakes offers the full arc of care, including independent living, assisted living, skilled nursing, and memory care. Learn more about retirement opportunities waiting for you at Twin Lakes, where independence is treasured. Call (336) 538-1572 to schedule a tour today.

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