Top Tips for Helping You Budget Your Way to a Stress Free Retirement

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Dreaming of retirement?

Do you sit at work or at home daydreaming visions of piña coladas and sun kissed beaches? Or whiling away the hours in the garden? 

And why shouldn’t you, honestly? You’ve worked hard and you deserve a chance to slow down and enjoy all that life has to offer. Getting the most out of your retirement isn’t hard. Provided you take the time to plan effectively. Below, we share our top tips for budgeting your way towards a happy, stress-free retirement.

But first, why plan ahead?

It seems obvious. But so many retirees fail to take a proactive approach in planning. Leaving them with unrealistic expectations and insufficient funds. By planning ahead, you’ll get a fuller picture of what you’ve got to work with. Allowing you peace of mind and helping you to avoid financial pitfalls.

Make a monthly budget

This is undoubtedly the most important step to stress free retirement planning. Once you have a budget you can stick to, you can more effectively plan your finances and work out what you’ll need to do to create your dream retirement.

First, gather your bank statements, credit card statements, payslips and tax returns from the last 12 months. Highlight all your fixed expenses and divide them into categories: 

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  • Essential (e.g. food, housing, transportation)
  • Non-essential (e.g. entertainment subscriptions, gym memberships, etc.)
  • Required (e.g. insurance, tax)

Then, add these up and work out a monthly average. Doing this is simple and means you’ll have a better idea of your outgoings during retirement. 

Don’t forget to factor in the fun stuff, too. That means date nights, holidays, day trips, etc. 

Make some changes

If you find that your retirement income isn’t going to cover your outgoings and accommodate the things you want to do, it’s time to consider what changes you can make to close the gap. What lifestyle changes can you make? It doesn’t necessarily have to be dramatic changes like downsizing your home or buying a cheaper car. It could simply be cutting down on your weekly takeout or spending less on new clothes. The little things add up. What trade-offs are you willing to make in order to enjoy a comfortable retirement free from stress?

Use a calculator

If you’re not sure where to start when it comes to budgeting for retirement, there are tons of helpful online calculators that can help you get a handle on things. They take into account your age, income, health and costs to help develop a custom retirement budget. We Are Just has a great calculator that’s really simple to use. 

Plan your investments

Investing early is a good way to prepare for retirement. Many retirees say they wish they had started investing earlier rather than solely relying on low yield savings accounts. Predictable investments are a safer bet. But the return will of course be lower. If you don’t really know your stocks from your bonds, it might be worth speaking to a financial advisor, who can help you plan.

Tackle any debts

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You should ideally be aiming to pay off your mortgage before you retire. It will be a huge weight off your mind – and your wallet! You should also look at any debts that need to be paid off and make a plan to do so before hanging up the briefcase. Credit card debt is a major one. Work out how to pay off your credit card debts early and if you find you’re regularly going into debt – take a look at your spending and how you can cut down or earn more to make up the difference. 

Control your spending

When looking at your monthly budget, you should get a good idea of what your spending looks like on a monthly or annual basis. They say that the more you earn, the more you should save (rather than spend). When you retire, you won’t have that same income to rely on. So, it’s important to look at your spending and identify areas that you could cut down on if you need to. It’s easy to get into a habit of wasteful spending. Just another $4 coffee or Saturday night takeout. By being in control of your spending, you’ll be in a better position to ensure it isn’t going to seriously impact your retirement plans.

Plan your bucket list

If you’re thinking about retirement, you’ve probably considered some of the things you’d like to do or achieve with your new found freedom. Sit down (with your spouse if you have one) and make a list of your priorities and things you want to do. For example:

  • Travel the world
  • Attend culinary school
  • Learn a new skill
  • Take a yearly cruise
  • Visit family more
  • Buy a classic car

Once you’ve thought about these things, you can begin to factor them into your budget.

Consider healthcare

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According to insurer Genworth, the average 65 year old American couple will need around $285,000 to cover healthcare costs during retirement. That’s a lot more than most people budget for. 

Medicare will only cover around 50-60% of your healthcare costs. So, it’s worth paying into a health savings account to make up the rest. You can also invest in long term care insurance. More people are living longer and that means more are going into care homes in the later stages of life. 

And, if you want to spend less on healthcare in retirement, our top tip is to look after your health and wellbeing now. Exercise, eat healthily and take better care of yourself. Not only will that help you live longer and spend less in retirement, but it also means you’ll be in better condition to enjoy your retirement fully. 

Ease into it

A lot of people jump straight from full time working to full time retirement. And while great for some, for others it can be a huge culture shift. It might be worth considering a slower transition to help you (and your budget) adjust to life after work. For example, could you reduce your hours or move to part time? Not only will this help you mentally prepare for a slower pace of life, but you’ll also have additional funds to spend when you stop work altogether. 

Moving house?

During their working lives, many people plan their house buying decisions in order to be closer to job opportunities or to lessen their commute. Once you’re no longer working, you won’t be tied to a particular place for your job. Meaning you can move anywhere you want! Whether that’s nearer to the grandkids or a small place out in the countryside – the choice is yours. You may even want to up sticks and move abroad. 

If you’re headed overseas, make sure you do your research into the costs of living where you’ll be living. You might end up saving a lot on daily living costs or spending quite a bit more. For example, moving to Mexico is likely to be cheaper. While a villa in the South of France is going to set you back a fair amount. Factor this in when you plan your budget. Not to mention moving costs!

You could also consider downsizing your home to shore up more money for your retirement. Especially if your kids aren’t at home any longer and you don’t need the space. 

Plan your estate

If you want to leave provision for your loved ones, you’ll want to consider this in advance. List your assets and make sure they are set aside when you factor in your retirement budget. Make a will and revisit it regularly. Your will writing solicitor can help you with this. 

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The average retirement length, according to U.S government statistics, is around 20 years. So, it’s important to plan for the long term. Blowing all your savings on a crazy trip might sound like fun. But, consider how that will impact the following 20 years. 

Be smart with your budget and plan ahead. Soon, you’ll be counting down the days to your dream retirement life. 

Author bio:

Katy Carter is an experienced writer with a background in law. She works for Ratcliffes, a small solicitors in Faversham, sharing helpful information on topics including family law and legal advice for seniors.