We hope you find this article helpful.
If you want Safe Wealth Plan to assist you with your safe wealth strategy, click here.

How to Create a Retirement Budget

In this article

Everyone dreams of a comfortable retirement. Unfortunately for many, poor planning leads to insufficient retirement savings.

According to the Congressional Research Service, in terms of the cash amounts used to define poverty status in 2021, 10.3 percent of the elderly population had incomes that were below the poverty standards. 

The overall number of elderly people has climbed since the 1970s, but so has the number of impoverished elderly people. In 2021, 5.8 million seniors aged 65 and over lived in poverty.

In addition, the poverty rate is higher for people over 80 than for other elderly adults. About 12.9 percent of those 80 and older lived in poverty, compared to poverty rates of 9.5 percent for those aged 75 to 79, 9.7 percent for those ages 70 to 74, and 9.6 percent for 65 to 69-year-olds.

It can be difficult to retire without a budget; however, with the right retirement budget planning, you can guarantee yourself a pleasant future by setting aside a sizable sum of money for your retirement years.

With a good retirement budget, you can stay financially independent and not have to rely on your children, grandchildren, or other family members for help. Here are some effective techniques to help you create your retirement budget.

Calculate Your Retirement Financial Needs

With how the world is changing, it is difficult to anticipate how much money you will need for retirement. However, having a clear understanding of your retirement goals does make this process easier.

First, determine what kind of lifestyle you want to have during retirement and make sure you’re being realistic. Once you know how you want to live in the future, it will be easier to figure out how much money you will need for retirement.

The best place to begin is by keeping track of your current expenditures and adding up new expenses that you anticipate during retirement. You’ll be able to estimate how much you spend on your existing way of life and save money for new things that you want to include in the future. 

Here are important things to consider in calculating your retirement budget needs:

  • Housing
  • Rent or mortgage
  • Real estate taxes
  • House insurance and maintenance
  • Medicare premiums
  • Medications
  • Hearing aids
  • Physical therapy
  • Other healthcare expenses
  • Income taxes on withdrawals from traditional 401(k)s or IRAs
  • Food
  • Entertainment
  • Travel
  • Family
  • Transportation
  • Clothing
  • Emergencies

Once you’ve paid for all of your necessary costs, plus any extras you want to enjoy in retirement, it’s easy to figure out how much you’ll need to save.

Total All of Your Income Sources

Once you know how much you want to spend in retirement, add up all of your sources of income to figure out how much you need to save. Your sources of income will act as a bucket from which you may draw funds when you retire. Here are some sources of income that you may want to add up:

  • 401(k) or 403(b) plans
  • Annuities
  • Other retirement plans to which you and your employers have contributed
  • Social Security
  • Pensions
  • Traditional and Roth IRAs
  • Current Savings
  • Investments
  • Passive income such as rental properties, royalties, and businesses
  • Part-time or freelance employment

Add up all the money you expect to get from these sources and divide it by the number of years you plan to spend in retirement. This is a rough estimate of your annual income. You may then divide it up into monthly earnings for easier estimation and calculation.

Plan Your Distributions

Distributions are one of the main sources of your retirement income; your 401(k),IRA or annuities will probably be your biggest pots. You will start receiving distributions or be able to start making withdrawals from these accounts once you reach a specific age. 

Planning your distribution schedule, including when, how, and from which accounts, is an essential step in developing your retirement budget. The key is to not take out so much money that you run out of this money-making resource and can no longer make money from it. If you believe you have made a mistake, read Things to Do If Your 401(k) Is Losing Money.

Planning your distributions with an experienced licensed agent is the best option, as they can help you organize your distributions and get the most out of them. 

Utilize the Zero-based Monthly Budgeting Method

A zero-based budget adds up your monthly revenue and subtracts all of your spending, leaving nothing left over. This method helps you make sure you spend, save, or give away all of your money the right way. 

Write down your monthly income, list your monthly expenses, list down your seasonal expenses, list down a specific amount to save for your retirement budget, and subtract your expenses from your monthly income. Adjust your expenses until the result equals zero.

For example, list the following essential expenses:

  • Groceries
  • Utilities
  • Home repair and maintenance
  • Transportation, including gas and vehicle maintenance
  • Clothing

Nonessential expenses:

  • Travel and leisure
  • Subscription services
  • Hobbies

Seasonal expenses:

  • Property taxes
  • Insurance premiums
  • Auto registration
  • Seasonal occasion expenses

Once you have listed down all of your expenses and created a zero-based budget, stick with it as much as possible and track your spending to make sure you stay on track with your retirement savings.

Set Up Automatic Transfers

Setting up automatic transfers enables you to secure your retirement savings. You can set up this feature between your bank account and retirement account. Every time you receive money, it will automatically send a certain amount to your retirement account every month, ensuring that you won’t forget to set aside funds for your retirement budget.

Additionally, you may set it up so that money set aside for the future is transferred from your bank account into your retirement account regularly. By doing it this way, you may be more likely to save money for your retirement budget and less likely to waste it.

Think About Investing

Saving is always a safe bet for your retirement budget, but the right investments can help you reach your goals faster and save more money. Although you may eventually see a small increase from an interest-bearing savings account, the returns you get from the right investment can triple the money you get from your savings account. Think about investing if you want to see your money grow. All investments involve risks, but with the right knowledge and support, you can avoid some of them.

While planning for retirement, take the sequence of return risk into account. If you want to start investing, be sure to conduct in-depth research on the types of investments that are best for you. More importantly, if you want your investments to be more effective and successful, you should work with agents and investment advisors who are reliable and licensed.

Pay Off Your Debts

Paying off your debts is one of the easiest ways to make a budget for retirement. Debt is expensive, and it can feel like you’ll never pay off the principal and the interest. However, being debt-free is one of the best ways to prepare for retirement. Instead of putting money toward your debt payments every month, you can put that amount toward your retirement.

A Safe Wealth Plan Can Help You Protect Your Retirement Savings.

Safe Wealth Plan can help you find the best financial solution for your specific needs, particularly your retirement. We can help you put your money in annuities, insurance, and other safe investments to keep it safe. Our approach is to help you plan your retirement income, which is meant to protect your retirement assets, make sure you don’t run out of money in retirement, and give you information on the products used to build a safe wealth strategy.

If you’re unsure of where to begin, get in touch with a Safe Wealth agent today.

Download Our FREE Safe Wealth Guides

Need help?
Schedule a consultation with a Safe Wealth Plan Agent today

Subscribe to updates

About the Author: Benjamin Hulburt

Benjamin Hulburt - Safe Wealth Plan