Some of your expenses will go down once you retire, like work-related travel or professional clothing. [4] X Research source Also, if you pay off your mortgage before you retire, you can eliminate that monthly expense. [5] X Research source [6] X Expert Source Brian Colvert, CFP®Certified Financial Planner Expert Interview. 27 May 2022. On the other hand, some of your costs will likely go up, like the money you spend on travel, hobbies, or entertainment. In general, retirees spend about 70-90% of their pre-retirement earnings each month to maintain their standard of living. [7] X Trustworthy Source US Department of Labor Federal department responsible for promoting the wellbeing of workers Go to source
Of course, there are exceptions. Your power bill might go up a little if you’ll be home more often, for instance, or your car-related expenses might go down if you’re not driving as far each day. Your rent or mortgage and utilities can vary a lot depending on things like where you live and the size of your home. That’s why it’s helpful to look at what you’re currently spending on those bills.
If you find yourself needing to cut spending, this is sometimes an area where you can scale back a little. For instance, you might save on groceries by buying meat in bulk and freezing it for later. On average, retirees spend just around $480 on food and about $560 on transportation. [10] X Research source Be realistic about your needs. Things like shoes, clothing, and food are essential, and if you budget too conservatively, you could find yourself overspending.
If you retire before you turn 65, plan to pay for health insurance until you’re old enough for Medicare. [12] X Research source Even once you do have Medicare, things like dental and vision care will likely still be out-of-pocket.
Remember to include things like memberships and subscriptions. If you plan to take up a hobby like golf, factor the costs for that into your budget as well. Retirees usually spend around $200 a month on entertainment. [14] X Research source This is an area you can cut back on if you’re struggling to make ends meet, but try to include at least a little discretionary spending—you’ve worked hard and you deserve to enjoy your retirement.
Also, plan ahead for one-time expenses you might have, like wedding or graduation gifts or buying a new car.
Social Security payments rise a little each year to account for inflation, but they’re not guaranteed to keep up with actual inflation costs. If inflation grows faster than expected, you may need to make some cuts to your budget to account for that. Remember that, if you were married for 10 years, you are eligible to get your spousal benefit from Social Security. [17] X Expert Source Brian Colvert, CFP®Certified Financial Planner Expert Interview. 27 May 2022.
For instance, if you have unexpected medical costs or you need home or auto repairs, you’ll have the peace of mind that you can pay for that. Some financial experts say to budget about $200-$300 a month for unexpected big-ticket costs. [21] X Research source If you have to use your emergency fund, plan to cut back on some of your planned monthly spending until it’s replenished.
For instance, if you have $1 million in your retirement account, you can draw out $40,000 a year for 25 years. If you find that 4% a year doesn’t cover your living expenses, you can always adjust your withdrawal rate later on. Just keep in mind that if you draw out more money now, you won’t have as much for the later years of your retirement. Depending on how your investments perform, you may need to adjust your budget some years to account for any fluctuations.
Although you can start drawing your retirement when you turn 62, you’ll get more money each month if you wait until your full retirement age, or 65. [27] X Trustworthy Source US Social Security Administration Independent U. S. government agency that administers Social Security and related information Go to source If you wait to draw Social Security until you turn 70, you’ll receive even more money each month, since this is the cap for the benefit. [28] X Expert Source Brian Colvert, CFP®Certified Financial Planner Expert Interview. 27 May 2022. In 2021, the average monthly Social Security payment is around $1500. [29] X Research source For an estimate of how much you’ll draw, use the Social Security Administration’s online calculator: https://www. ssa. gov/OACT/quickcalc/.
Payments like pensions and annuities are often paid monthly, although they’ll sometimes be paid out once a quarter, every 6 months, or annually.
Try doing something you’ve always wanted to do, like starting your own consulting business or teaching art classes. This is your time to follow your dreams! Other good jobs for retirees include babysitting, tutoring, bookkeeping, retail, and office management. [33] X Research source
