When you’re ready to retire, you need a plan for making your savings last. That’s where a well-thought out budget comes in handy. Without a detailed plan for spending and saving, you run the risk of depleting your nest egg ahead of schedule If retirement is on the horizon, here are some tips for creating a budget you can live with in your golden years.
Evaluate your current spending
The first step in establishing your retirement budget is looking at where your money’s going now. According to the Bureau of Labor Statistics, total annual expenditures for seniors aged 55 to 64 came to $56,267 annually as of 2014. Housing is the largest expense, accounting for 32% of that number.
If you’re still a few years away from retirement, you should be looking at how your spending adds up in terms of things like housing, food, transportation, health care and debt payments. Once you have an idea of what’s going out each month, the next step is to focus on what you can reduce.
For example, if you’re still paying on credit cards or student loans, wiping those debts out should be a priority. Then, you could focus on paying down your mortgage or even downsizing your home altogether to streamline the amount you’re spending on housing. The point is to trim the fat wherever possible to minimize what you need to cover your basic expenses in retirement.