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Retirement and Your Budget: Credits and Debits

Just like any major life event, retirement brings about a lot of unexpected changes.  Many of these changes will be in lifestyle, hobbies, or location, but the most worrisome for retirees are the unexpected changes with their financial situation.  If you are like most of our clients, you have planned well for your retirement, but part of this plan is the  need to understand the factors affecting your retirement budget, both good and bad.

You’ve been living off a certain budget for years, and your jump into retirement could throw those figures for a loop.  Preparing for these adjustments is critical to your retirement planning success.

Here is a list of six of those factors, three that will cut into your current budget, and three that will save on it:

Helping The Budget (Credits)

1. No More “Working Expenses”

This might seem a bit overarching, but there are a few key expenses associated with your working days that you can wave goodbye to as you sail off into retirement.  A major one is your retirement savings.  Hopefully you have been stashing away a portion of your income for years into your retirement piggy bank, but you will soon reach the day when you can stop putting it in, and start taking it out.  Another expense you can leave behind is that pesky payroll tax that has been eating away at your income for years.  Also keep in mind, the life insurance that has been costing you a pretty penny might not be a necessity anymore.  All of these things can quickly add up to more money in the bank (literally) for your retirement budget.

2. Commuting Costs

There is a reason they call it “life in the slow lane.”  Compared to all the running around you’ve done throughout your career, it might feel like much of your retirement time is spent in no lane at all.  Without the commute to and from work every day, you will likely see a drop in a lot of key expenses like gas, vehicle maintenance, or even the cost of that extra car altogether.

3. Family Expenses

This is a cost that you hopefully have seen decrease slowly over time, but as you hit your retirement years, you should aim for this number to be at a minimum.  Groceries, utilities, meals out, all of those things that used to account for four, five, or six people should now be covering just one or two.  But, as noted below, don’t forget about those kids completely.

Hurting The Budget (Debits)

Living Longer

Life expectancy continues to rise, which should be something to celebrate but for many retirees this good health can quickly become an Achilles heel for their retirement income.  Your initial budget could need to be stretched years, even decades, thinner. Also, rising right along with that expectancy is the cost of healthcare that seems to be on an uncapped path upward.

Higher Taxes and Inflation

Some of you may have heard that our country has a bit of a budgeting issue and, while a clear and concise solution remains to be seen, it’s safe to assume that taxes will be going up, right along with inflation.  Neither of those will have a positive effect on your budget as you move deeper into retirement.  Make sure that when you are doing the math on your retirement income, you are planning for these seemingly pessimistic numbers.

Your Kids

Although, as mentioned above, most of your family expenses should be cleared by the time you reach retirement, never count out your kids when it comes to being a drain on your wallet.  Whether there’s an emergency bailout or they are asking for a loan from the “Bank of Mom & Dad”, make sure you factor your inability to say “no” into your budgeting plans.