Advertisement
Budgeting

The Importance of Budget Planning in Retirement

Drawing up a detailed budget can be the difference between a carefree retirement and years of penny-pinching and worrying. Here are some tips.

We’ve all heard the saying, “The devil is in the details.” These details can sabotage our retirement. We need to plan for the unforeseen, think about the “what if’s” and be careful to consider every aspect of what retirement entails to successfully budget for our retirement years.

Setting up your retirement budget and including all of the budget details can be a tedious task, but it can be the difference between a successful retirement or spending our retirement years low on funds and high on stress. In other words, failing at retirement.

Advertisement - Article continues below

Our retirement budgets aren’t things we typically talk about with friends or when we’re socializing, because there is nothing fun or glamorous about it, but each one of us still needs to take the time to put a budget together. It’s one of the most important steps on the road to a successful retirement. Here are a few tips:

Pay Down Debt

Credit card debt could cost you 15% or more in interest rates and finance charges. That’s why credit cards should be first on the list of debts to be paid down or paid off.

But, what about a mortgage debt with an interest rate of 3% or 4%? Many financial advisers recommend keeping the mortgage and using your extra funds to invest. Those investments could eventually lead to a mortgage payoff, but is this the right choice for you?

Advertisement
Advertisement - Article continues below

Some people prefer to remove the “unknowns” of investments and pay off the mortgage. By not having a monthly mortgage, they feel confident that whatever happens in the stock markets or to their retirement assets, they will always have a roof over their heads. On the flip side, by not paying off the mortgage, funds stay in investments. If you choose the route of investing and NOT paying off the mortgage, make sure you fully understand the plan your adviser has set forth and be prepared if some investments fail to earn enough to pay off that mortgage later.

Know Your Health Care Options

Even if you have group coverage through a former employer, Medicare or the Medicare Advantage plan can help pay for health care costs. Unfortunately, these costs tend to increase with age.

Advertisement - Article continues below

There are many options out there, so you need to do your research. Call your local AARP chapter and go to mymedicare.gov to get some of your questions answered and learn about other helplines that may be available. And, most people don’t factor in the rising costs of prescription medications. These unexpected costs tend to hit retirees hard if they find themselves in declining health. Make sure you know your options and budget accordingly.

Don’t Forget to Pay Yourself

Whether you use investments, annuities or withdrawals from retirement accounts, make sure you include in your budget a way to reimburse your savings account – in addition to covering your fixed expenses. Having a savings account ensures that you have the ability to pay for things you want to do and maybe some things you haven’t even planned on! Why not use some of the free time in your retirement years to travel to places you’ve always wanted to see or plan a birthday getaway with your spouse?

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

Many financial advisers will advise you to put away four to six months of income into savings for emergencies. That’s good advice! Just one emergency can wreak havoc on your budget. Having a separate savings account can definitely come in handy.

When creating your budget, make sure to leave room in it to allow you to save a few hundred dollars per month. Depending on your investments, your savings could deliver better “returns” for you in retirement. Make a plan and stick with it. Keep paying yourself so you don’t see your savings disappear as your retirement moves along.

A budget is a vital part of your retirement plan. A good financial adviser will stress the importance of budgeting and will work with you to get all of these details in place so that you can have the retirement you’ve worked so hard for.

Shanna Tingom is a registered representative, securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Heritage Financial Strategies are not affiliated.

Advertisement

About the Author

Shanna Tingom, AAMS®

Co-Founder, Heritage Financial Strategies

Shanna Tingom is a registered representative, securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Heritage Financial Strategies are not affiliated.

Advertisement

Most Popular

18 Things You Can't Return to Amazon
Smart Buying

18 Things You Can't Return to Amazon

Before tossing these items into your virtual shopping cart, be sure to read Amazon's return policy first.
September 17, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 18, 2020
7 Foreign Countries Luring Americans to Work Abroad During the Pandemic
careers

7 Foreign Countries Luring Americans to Work Abroad During the Pandemic

Work remotely – really remotely – in these appealing destinations offering special visas for American workers.
September 18, 2020

Recommended

HSA Limits and Minimums
health savings accounts

HSA Limits and Minimums

Annually adjusted contribution limits and other requirements must be met if you're covering health care costs with a Health Savings Account.
September 21, 2020
Don’t Be Paralyzed by Uncertainty
retirement planning

Don’t Be Paralyzed by Uncertainty

You definitely need a plan, because what’s ahead could be scarier than what’s behind us.
September 21, 2020
Insurance for Long-Term Care at Home
retirement

Insurance for Long-Term Care at Home

In the wake of COVID-wracked nursing homes, increasingly more people are looking at options to age in place with long-term care insurance.
September 17, 2020
A Step-by-Step Guide to Being an Estate Executor
retirement

A Step-by-Step Guide to Being an Estate Executor

Whether you’re planning ahead for your own heirs or have been asked to serve as an executor of an estate for someone else, it pays to understand what …
September 17, 2020