According to the Nationwide Retirement Institute, for those working at age 50 and older, 44% of them believe that their living expenses will stay the same once they leave the workforce. And, interestingly enough, approximately 34% expect their living expenses to decrease, while 22% believe they’ll go up. You most likely can expect things like your food budget and electrical bills to remain somewhat constant, but certain expenses surrounding transportation and leisure activities might see some drastic changes due to your newfound freedom. It can be hard to wrap your head around how much your life will change in retirement, from your day-to-day activities to your overall priorities and goals. But, it is important to get some sense of how retirement affects one: your budget. Ultimately, you want to make sure that you keep an eye on your expenses and retirement budget in order to have a better understanding of what your retirement income will cover, and to help identify certain areas of expenditures where you’ll need additional income to cover.
It’s certainly no easy task to estimate exactly how much your expenses and overall budget will change when you enter into retirement. Everyone worries about making sure they have enough money saved up to last them in retirement, but what about just getting a sense of how much you’ll spend from month to month? What will you spend more on, what will you not need to pay for anymore? As we mentioned before, food and electrical expenses are a couple of examples of things that will likely stay pretty close to where they are now. But, over the years, inflation may cause these bills to increase. The only thing is that there’s no real way to determine exactly how much inflation you’ll have to deal with in retirement. However, you probably can use your current costs on “the basics” as a benchmark.
This is why setting budgets is perhaps one of the most effective ways to get your spending habits under control. However, the monitoring of purchases and cutting back on expenses to better match your source(s) of income is easier said than done. Day-to-day lifestyle habits and certain psychological instincts make it increasingly difficult for people to stay on-track when it comes to their budget. In the end, creating a more explicit budget will help you to decide what you can cut out in terms of the more desirable, maybe unaffordable, and perhaps unnecessary expenses.
In the end, you’ve worked too hard to be left with retirement savings that aren’t sufficient enough to help you accomplish your goals and live out your dream life in retirement. Working with any advisor who puts their interests above yours can seriously impact your nest egg potential. Our loyalty is to you and your interests, and we wouldn’t have it any other way. Click to request your complimentary, no obligation financial review and we can help you outline your potential expenses and create a plan for your future retirement budget.