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.
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:
Sign up for Kiplinger’s Free E-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.
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?
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.
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?
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.
Get Kiplinger Today newsletter — free
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.
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.
-
Here's How To Get Organized And Work For Yourself
Whether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
By Laura Petrecca Published
-
How to Manage Risk With Diversification
"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
By Charles Lewis Sizemore, CFA Published
-
How Much Money Is Enough to Be Happy? Can You Have Too Much?
The relationship between money and happiness is complicated, but the experts agree on these three eye-opening fundamentals.
By Evan T. Beach, CFP®, AWMA® Published
-
Five Year-End Strategies You Can't Afford to Miss
Instead of making New Year's resolutions, consider making some money moves that could help save you big bucks on your taxes.
By Sevasti Balafas, CFA, CPWA® Published
-
Buying an Insurance Policy: Three Ways to Do It
You can buy an insurance policy through an insurance agent or broker or on the internet. Which way works best for you?
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published
-
10 Ways Your 1031 Exchange Can Go Horribly Wrong
Don't let your tax-saving strategy become a financial nightmare — discover the hidden pitfalls that could turn your 1031 exchange into a costly disaster.
By Daniel Goodwin Published
-
From Entrepreneur to Retiree: Boosting Your Business' Value
When business owners contemplate retirement, their first step should be maximizing the value of their biggest asset. Here are a few steps that could help.
By Hilgardt Lamprecht, CFP®, CKA®, CExP™ Published
-
You've Got a Trust: Now Who Should Be the Successor Trustee?
You've set up a trust to protect your assets and your beneficiaries, but you still must choose the right person to execute your wishes. Here's how to do that.
By John M. Goralka Published
-
Three Ways Fiduciary Financial Planners Put You First
Fiduciary financial advisers are required by law to work in your best interest. Here's how they are key to intentional and efficient financial management.
By Jon Melton, MDRT and CORT Member Published
-
How Long-Term Care Insurance Has Become More Flexible
Today's long-term care insurance offers retirees more appealing options, which can preserve assets and protect the financial stability of a healthier partner.
By Derek A. Miser, Investment Adviser Published