Budgeting During Retirement

If you’ve made it to retirement, you’re likely excited for what’s to come. You can now have enough time to focus on what makes you happiest. But the beginning of your retirement looks different than how your situation will look as time passes. As your priorities shift, your retirement will also evolve. One of the most important steps you can take immediately is to learn what changes may take place and how you can create a budget for each phase. Harvest Wealth Partners wishes to work alongside you as you build a financial strategy for your future. Visit us at a consultation for advice regarding your situation.  

Know the Three Stages of Retirement Spending

Generally, individuals will experience three stages of retirement with special financial considerations and priorities in each. 

• Early Retirement. Initially, retirement provides freedom from child-rearing and work obligations. Many people spend their funds on travel and other pastimes early on. 

• Mid Retirement. As the “go-go” years transition to “go slow” years, you may determine your priorities based on your health, legacy and goals. For example, traveling may no longer be a high priority once you reach this stage. 

• Late Retirement. These are the years when health issues and other matters take precedence. 

Consider Sources of Retirement Income

Most people entering retirement will receive a fixed income from three possible sources: investments, savings and Social Security. Some people have a pension, which may provide further benefits. Regardless, you need to commit to a financial plan and begin budgeting as soon as possible. It’s important to stay with your plan because you will need to convert your investments into a replacement for the income you received from working.  

Create Your Budget Before You Retire

Even though your budget may be fluid, it needs to be built as a part of your financial plan. You do not want to run out of money to use during your retirement, and planning ahead can help you increase the chances of having sufficient funds. Budgets should consider expenses for housing, food and transportation. Many people will also wish to allocate funds for travel and other enjoyable activities. However, you also need to consider unexpected expenses that can quickly affect your savings

• Taxes In Retirement. Generally, you will pay taxes when you withdraw from your retirement account. Plan on withholding at least 20% of a withdrawal. Of course, the exact amount will vary depending on your specific circumstances, which is why it’s important to discuss your needs with an advisor. 

• Medical Expenses. According to some estimates, the average person needs $295,000 to pay for medical expenses during retirement. Keep in mind that Medicare isn’t guaranteed to cover every health care expense. 

• Caring For Adult Children. Considering that about one in three young adults aged 18 to 34 are living with their parents, those preparing for retirement may need to consider expenses relating to their adult children. 

Talk to a Financial Advisor

Planning for retirement requires an understanding of what you hope to achieve. Talk to an advisor at Harvest Wealth Partners to discuss how you can budget for your retirement. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

This material was prepared by Nuvew Web Solutions.