How to Plan for Retirement: Making Your Retirement Budget Last

Presented By: Pennsylvania Capital Management

Retirement isn’t a mandate, but it is a benchmark that many people hope to reach at some point during their lifetime. Depending on when you retire, you may have a long period of time to live off of your retirement income. So, when you’re thinking about how to plan for retirement, you must prioritize creating a retirement budget that will last. This will mostly be sourced from Social Security, your savings, and other streams of income like retirement accounts, investments, or anything else you’ve got tucked away for a rainy day. 

Many seniors worry about living on a fixed income when they’re figuring out how to plan for retirement, so it’s important to have some strategies in place for making your retirement budget last. After all, none of us really know how much time we’ll have post-retirement. 

Some of us could have a few years, others could have decades. In speaking with a couple of my friends who have enjoyed a long, happy marriage and, so far, 27 years of retirement, I learned a few strategies that they deploy to keep their portfolio healthy for now and in the future.  

Have Good Budgeting Habits In Place

Right from the start of their marriage, my friends Charlie and Marlene had a strong budgeting strategy in place. They kept each other abreast of each other’s financial details, they both were aware of their expenses and incoming cash flow, and they knew where everything should be spent. Over the years, Marlene became their family’s budgeter and diligently kept track of their files of revenue, everything that was essential to keeping the house financially sound. 

Regardless of where you’re at in life – if you’re decades from retirement or only a few years away from when you want to retire – you should have a strong budgeting strategy. This is not only important for allowing you to save money, but it also helps instill good habits that will carry over to when you are retired and need to be able to function on a fixed income without running out of money. When you’re younger and you’re still working, it may feel less important to crunch the numbers and keep a close eye on every penny you spend because you can just make more money, get a second job, or find other ways to create wealth. 

Now, you could do this in retirement, too, but if you want to live a life that doesn’t involve working in a traditional sense – or maybe you don’t want to work at all – then it all comes down to how you plan for retirement with the money you’ve got in reserves. 

If you’re not completely sure of how to create a budget or manage one, here’s a good starting point: 

• Add up what you get from a pension, Social Security, or any other income, and put that at the top of your budget. 
• Subtract all your monthly expenses from that number at the top. 
• After you’ve subtracted your expenses from your monthly income, you can save or spend the rest. 

You can also think about areas like your grocery bill and meal plan with a purpose. By knowing what you need to buy in advance and price shopping, it’s possible to save money at the grocery store, and those savings will add up over time. What’s most important is that you plan something in regard to your budget so you’re not spending without direction and a dedicated purpose. 

How to Plan for Retired Life: Find Ways to Make It Exciting

Perhaps one of the biggest perks of retired life is the ability to live life on your terms. Imagine this: You don’t have to report to work on a schedule, you don’t have to plan your weeks around a job, and you don’t have to think about requesting any time off for vacation. However, it’s important not to allow yourself to fall into the trap of becoming complacent or, worse, sedentary. 

Life goes on at every age, so it’s important to find the things you’re most passionate about and pursue them. Everyone needs a reason to get up in the morning; something that will inspire them to enjoy life to the fullest and keep it exciting. Because you’ve opened up the opportunity to pursue hobbies, interests, or tasks you’ve maybe wanted to do for years but just didn’t have the time, you can do these things in retirement. And they don’t have to be costly endeavors. Some people may choose to spend some of their budgets on travel, vacations, and other experiences, but others may prefer to live a more simple – but still active – life. 

Find ways to volunteer in your community, serve as an advisor on boards that were connected to your previous career, or you can even take on small jobs that make a little money as long as it makes you happy and you’re healthy enough to work. 

• What’s important here is self-fulfillment and self-satisfaction. 

When you get into your senior years, even well into your 80s, you can still have a vital, engaging, and exciting life. Spend time with your kids and your family, do the things you love, and find ways to do them in a manner that’s affordable and keeps your financial situation under control. But don’t hold yourself back. 

Stay On Top Of Your Credit Card Bills

Tracking your spending isn’t the only important factor in keeping your retirement budget under control. Especially when considering credit card spending, you want to start with a base. 

• Above all else, it’s important to not make late payments on any of your credit cards. 

This not only avoids any late fees but also helps you maintain a good credit score even if you aren’t doing other behaviors that contribute to your score, like having loans or mortgages. You may rely only on revolving credit during your retirement years because you don’t have the need for loans anymore. You’ve paid off your house, you own your car – or you don’t need a car – and you aren’t going to be dealing with student loans or other similar types of debt. 

However, if you do find that you want to purchase a new car or buy a home, maybe as a second home, vacation home, or investment property, you want your credit score to be in good shape so you can get the lowest possible interest rates. Keeping up on a budget is one way to make sure you’re aware of what you owe on credit cards as well as when they need to be paid. 

Think about insurance policies, too. Most insurance companies will check your credit score to determine what rate to charge you, and if your credit score is low, you might end up paying more than you would if you had a high credit score. Aim for the stars here and try to make an effort to get your score as high as possible for your income. 

• Having a high credit score also allows you to potentially qualify for credit cards with 0% interest. 

Credit cards with 0% interest are great for paying off higher-cost purchases over a period of time instead of taking the money directly out of your savings. For example, if you need to purchase something for $1,000 and you can budget that into payments over 6 months at 0% interest, you’ll only have to pay about $167 every month – and then it’s paid off. 

Suddenly, that $5,000 vacation you wanted to take just became more affordable. If you have a credit card that allows you to make purchases at 0% interest over 12-18 months, you can break that down into payments of $417 a month for 12 months or $278 over 18 months. For a lot of people, that strategy is going to be much easier on the budget than taking $5,000 out of savings directly. 

While you do have to be responsible with credit card usage, 0% interest credit cards essentially allow you to have virtually no cost if a life-changing event comes up, or someone in your family needs a little bit of financial help. 

Practice Good Bookkeeping Skills & Be Your Own Treasurer

Piggybacking off of the advice regarding budget planning and keeping track of your finances, it’s also important to practice good bookkeeping skills and be your own treasurer. Ultimately, how you manage your money is up to you. Some people are better at it than others, but doing something is always the best practice – and it’s even more important for people with a fixed or limited income. 

Consider keeping a physical record of where you donate money, how much all your insurance policies cost, your daily/weekly/monthly expenses, what you pay for medications and doctor’s visits, and determine what you really want to be paying. 

Awareness is everything, and when you have a clear picture of what you’re spending compared to what you’ve got coming in – or what you can rely on being able to draw every month – you’ll be able to figure out what needs to go on that 0% interest credit card, another credit card, what you can pay for in cash, or what expenses need to be trimmed, cut, or eliminated entirely. 

Be Transparent About Your Finances With Your Spouse & Kids

Just like awareness is important for your own peace of mind, it’s also important to be transparent about your finances with your spouse and kids. A lot of men shy away from telling their wives or partners the intricate details of their finances, and some people think kids shouldn’t be included in the conversation. But here’s why it’s important. 

If you’re upfront about what you’ve got incoming and what you need to spend, nobody gets any preconceived notions about what you’re able to buy. For example, my friends Charlie and Marlene told me that they were one of the last families they knew that got a color television set, and their kids would ask why they didn’t have one when all their friends did. Charlie and Marlene were honest with their kids about what they could and couldn’t afford, so they didn’t keep them in the dark, and it helped their kids better understand where the family was financially. 

• If your spouse and kids know what you can afford, they won’t wonder what you can’t afford and start thinking certain big-ticket items are in the budget if they aren’t. 

Final Thoughts

Charlie and Marlene have enjoyed decades of retirement and 66 years of marriage by operating under a policy of open communication and honesty – especially where money is concerned. It may seem like a simple thing, but how to plan for retirement, specifically planning to be able to afford the life you want for the long haul, can be accomplished if you have reasonable expectations, find ways to live life within your means without overspending, and are honest with yourself and the important people in your life about where you’re at. 

Retirement can be a beautiful time in your life, and there’s no reason why you shouldn’t live it fully. As long as you’re prepared for future expenses, have some good strategies in place to save money and cut costs where you need to, have a good support system, and hopefully have lots of hobbies and activities to bring you joy, your retirement years will truly be golden.