Managing your finances once you retire can be an adjustment. Many factors had changed from when you were handling your money while still working. One thing some people may not realize is that it is still important to save money during retirement. Let’s go over a few reasons why budgeting can be different in retirement.
Living with a fixed income
Now that you’ve officially become a retiree, it’s time to adjust those expectations to reality. Maybe you imagined this time different than the present, but it’s here. Many seniors must get by on a fixed income, which can be a hard change to get used to for some people. Potentially having less income means you must stick to your budget as much as possible.
Your needs are different now
Your budget will need to account for all the changes retirement will bring to your life. These changes include your new living situation, whether you have family that you will stop or continue to be financially responsible for, and everything you deem necessary for your new life as a retiree.
Fewer expenses and less spending
A positive about entering retirement is there are plenty of things you save money on because you have less reason to buy certain items or spend money on expenses that aren’t as necessary anymore.
Here are some examples of ways you are keeping money in your pocket now that you are retired:
· You have few transportation expenses since there is no more commute to work. If you live with someone, you could manage only having one car if you want to save even more money.
· If you can pay off your mortgage or downsize your house, you could save on housing expenses.
· With all the extra time you’ll have in retirement, there can be more time to cook and save on meals to reduce your food costs.
· Many consumer goods are no longer a necessity once you become a retiree. Purchasing work clothes, new furniture, and appliances are no longer a priority. If you can plan it right, buying or replacing household items before retiring can save money and prevent you from buying expensive goods after you transition to living on a fixed income.
Where you could see an increase in spending
It’s not all savings, of course. Many seniors can see an increase in spending on things like travel, entertainment, and housing. Let’s look at some of these costs more closely.
· Traveling is something most seniors look forward to once they enter retirement. Having more time to travel will have you booking flight after flight in all the excitement. Putting travel funds in your budget is helpful, but it can still be an expense that shows an increase since you could be taking more trips than before you left the workforce.
· All that extra time also means you might want to invest in some new hobbies or entertainment. Using those senior discounts will keep some money in your pocket, but you could see a spending increase at least while you try various ways to keep yourself entertained.
· Although you can see a significant decrease in housing expenses in certain circumstances, there is also a chance it’ll be an increased cost for you. Many retirees want to move to places like Florida, where they can relax and enjoy their retirement. Moving to a place that potentially has a higher cost of living will cost you, though. Moving into a senior community may also cost more than if you just downsized your home.
Your living situation will significantly impact your retirement budget, so be sure to make your decision based on what your finances can handle.
Healthcare needs have grown
When you get ready to retire, you are either close to or have already reached the age of Medicare eligibility. As you begin to look into the cost of Medicare, you might realize your healthcare needs are also starting to look a bit different.
As you age, you may need more medical services, which could mean higher premiums and medical bills than you’re used to receiving. Sticking to a budget can help make the rise in healthcare costs more manageable.
Keep saving, just not for retirement
You can finally check off save for retirement off your list! You have reached your retirement phase and no longer need to save for it. No more managing that 401k or Roth IRA. You’ve saved and invested in all that you could for your retirement.
The saving does not end here, though. It is still important to save money while you are in retirement. A nest egg for emergencies could come in handy 10 or 15 years down the line, and you’ll be grateful you continued to save for your future. Your future matters just as much when you’re 68 as it did when you were 48. Make sure your financial plan can take care of all your needs, and don’t forget to make room for fun in your retirement budget.