Why Retirees Need a Budget, According to a New Retiree
I never really had a budget. Retiring taught me why I need one.


As a longtime personal finance writer, I've lost track of the number of stories I've written about the importance of creating a budget. So now it's time for a confession: When I was working, I never really had one.
Instead, I took an approach that I suspect is pretty common. If I had money left at the end of the month — and was able to pay off my credit card balance — I figured I was doing okay. And like millions of working Americans, I had contributions to my 401(k) plan automatically deducted from my paycheck.
All of that changed when I retired. Without a regular paycheck, I can no longer use this back-of-the-napkin strategy to calculate how much I can afford to spend each month. Like a lot of retirees, I have a long list of things I'd like to do — from digitizing hundreds of family photos to touring Ireland — and most of them cost money, so having a plan is essential.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For many retirees, this transition is so discombobulating that they withdraw less from their savings than they can reasonably afford to spend based on the amount they've saved and their life expectancies. A 2018 survey by the Employee Benefit Research Institute found that retirees with $500,000 or more in savings spend less than 12% of their assets within the first 20 years.
For retirees who are struggling to get by, this may seem like a nice problem to have. But underspending in retirement is not without its downsides. While you may not run out of money, you could forgo activities that enhance your quality of life — and even help prevent cognitive decline.
Methods to manage your income in retirement
One strategy to get around this roadblock is to buy a single-premium income annuity, or SPIA. After you make a lump-sum investment, an SPIA provides a monthly check, for either a set period or the rest of your life.
By annuitizing your monthly non-discretionary expenses, such as groceries and utilities, you may feel more comfortable withdrawing money from your savings to cover the fun stuff. The drawback is that in exchange for guaranteed income, you usually can't get your investment back.
An alternative that gives you more flexibility is to create a paycheck by having a set amount of money withdrawn from your savings every month. You can adjust the amount withdrawn as your spending changes.
Another strategy is known as the bucket system. With this method, you divide your savings into three buckets: One for money you'll need for the next two years, another for money you'll need in years three through 10, and a third for funds you'll need in the distant future or for your heirs.
Money in the first bucket is placed in low-risk, easily accessible bank savings accounts or money market funds. The second bucket contains income-generating certificates of deposit and bonds, and the third is in stocks and other long-term investments that offer higher returns. This method protects you from having to withdraw money from stocks and mutual funds during market downturns.
For the bucket strategy to work, though, you need to get a handle on your expenses. Otherwise, you risk putting too much — or too little — in your first bucket.
Since I retired, I've used Google Sheets to track our monthly household spending, with categories for expenses such as food, health care, taxes and subscriptions. (Our 11-year-old Border Collie, Morgan, gets a category, too.) Scrutinizing our expenses has helped me reduce some of our costs.
I downgraded our Netflix subscription to the model that includes ads, which will save us about $10 a month, and I have become a big fan of digital coupons. Cutting back on everyday expenses has made it easier to plan for the big ones — like a trip to Ireland. Sláinte!
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
S&P 500 Hits New Highs as Rally Resumes: Stock Market Today
Tech stocks were the biggest gainers on Wall Street today, with Nvidia and Dell making notable moves.
-
The Shutdown Standoff Is Heading for Its Next Big Test
A key mid-October deadline could intensify the shutdown fight in Washington, and the fallout could soon hit workers and your wallet.
-
The Shutdown Standoff Is Heading for Its Next Big Test
A key mid-October deadline could intensify the shutdown fight in Washington, and the fallout could soon hit workers and your wallet.
-
The 'Permission to Spend' Rules of Retirement Spending
Here’s how to spend guilt-free when you are in retirement.
-
Major Insurers Scale Back Medicare Advantage and Part D Plans for 2026
Beneficiaries enrolled in Medicare Advantage and Part D prescription drug plans might be losing their plan as UnitedHealthcare, Humana, and Aetna (CVS Health) scale back offerings for 2026.
-
I Want to Retire, but I Have to Keep Working so My Adult Kids Have Insurance
It's a tricky period when your adult child is under 26 but needs health insurance. We ask financial experts for advice.
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out On
Most large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
-
Don't Let Your Equity Compensation Trip You Up: A Financial Expert's Guide
Stock options, RSUs and other executive perks can come with some serious strings attached. To avoid a nasty tax surprise, you need a plan.
-
I Work From Home, and These Are the Best Home Office Upgrades From October Prime Day and Anti-Prime Day Sales
Spruce up your office for less with these sales. You could also qualify for tax credits with some upgrades.
-
6 Steps to Protect Your Retirement Savings
Don't let a shaky economy and volatile market derail your retirement. These moves will help ensure your money lasts as long as you do.