Most folks spend the majority of their life working so that later in life, they can completely retire and enjoy a work-free lifestyle. In order to do so, they save money, year after year so that when the time comes, they have enough of a financial nest egg to make it into the latter portion of their life.
If you are the saving type, and have already started a retirement account, or want to begin saving for your future self, then keep on reading to learn about 5 tips to budget for your retirement.
It’s Never Too Early To Start
It’s literally never too early to begin saving for retirement. Some folks put money away every single paycheck. Retirement accounts are relatively easy to open, and the amount you save each month can be adjusted to fit your budget.
If you’re not ready for a retirement account, saving money in your normal savings is a good plan-B, that way, when you do open a retirement account, you can deposit a lump sum and get your account started strong.
The Rule of Thumb
When considering the budget, you may need for retirement, it’s important to think about the rule of thumb. Most financial experts agree that your monthly expenses in retirement will be about 70%-80% what they were pre-retirement.
That means, if you were spending $1,000 dollars a month before retirement, you can expect to spend $700 to $800 dollars once you’ve retired.
It’s important to note that this is just a rule of thumb, and that every person, and their lifestyle is different. However, it’s a helpful place to begin thinking about a budget for retirement.
Consider Your Income
Once you retire, your income sources will change. Instead of monthly paychecks, you will now rely on social security, pensions, investments, and the money you’ve saved over time. Consider your income by thinking about:
- Your retirement savings in an IRA account
- Retirement savings in your most recent employers 401(k) account
- Savings from a previous employer’s 401(k) accounts
- Financial investment
Consider Your Routine Expenses
After so many years, it’s normally pretty easy to get an idea of your routine expenses. We are creatures of habit after all, and we tend to maintain reliable lifestyles. This is true for our spending also.
When thinking about what your expenses will be, considering the following items:
- Rent
- Utilities
- Mortgage payments
- Loans
- Food
- Entertainment
Understanding how your routine expenses will mesh with your income as a retiree allows you to formulate an accurate budget plan.
Don’t Forget the New Expenses
After thinking about your expected monthly income and expenses, it is good to think about new or fun expenses. Without work, many folks fill their time with new hobbies. Some even take the opportunity to travel.
If this sounds like you, don’t forget to budget yourself additional income for your new lifestyle in retirement. After all, you’ve worked, or will have worked for decades. You deserve a break and some luxurious rest and relaxation!
Related Reading: How to Overcome Financial Struggles
