Income

Budgeting for the 4 Financial Phases of Retirement

No matter where you are in preparing for retirement, budgeting is essential. During your working years, “retirement” can seem like a faraway goal rather than a phase of life. But once it arrives, it becomes pretty clear that there’s more than one phase of retirement. Here are some tips to help you set a budget and manage it from your early through your late retirement phases.

Stephanie Faris

Stephanie Faris

Published July 15th, 2021

Table of Contents

Key Takeaways

Budgeting is an important tool in ensuring your income lasts throughout all of the phases of retirement.

Planning will start in pre-retirement, but you’ll really get a feel for your spending in the early phase.

By your 70s, you’ll likely have left the workforce for good and will be preparing to tackle late retirement, which includes finalizing estate planning.

During your working years, “retirement” can seem like a faraway goal rather than a phase of life. But once it arrives, it becomes pretty clear that there’s more than one phase of retirement. There’s the early phase, which involves making a retirement budget and preparing to make the move. Then there’s the earlier phase post-retirement, where you’re still getting your spending down and working out how much to take from savings. But as you shift to the middle and later phases, you’ll still need to balance things out.

No matter where you are in preparing for retirement, budgeting is essential. Here are some tips to help you set a budget and manage it from your early through your late retirement phases.

Budgeting for the 4 Financial Phases of Retirement

The toughest challenge you’ll face in retirement planning is determining just how much you’ll need to live on. Life expectancies can vary, and that’s important to keep in mind when you look at a retirement budget example. A typical retirement budget may follow the average life expectancy of 78.7 years, but if you’re in good health with a family history of living to the age of 90 or later, your own planning needs to compensate for that.

Chances are, your budgeting and planning will evolve during your post-retirement years. Understanding the four main phases can help you see how your needs will change.

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Pre-Retirement (age 50 to 62)

Long before you announce your retirement, you’ll start planning. In fact, you’ll probably be researching how to budget for retirement even before your 50s. But during the final decade or so of your full-time working years, you’ll probably put some serious time into making sure you’re financially prepared.

During pre-retirement, it can help to use a retirement budget planner to lay out your income and expenses. Start with your estimated Social Security payment, which you can track with a my Social Security account. Then include any pensions and annuities you have. Once you’ve done that, take a look at your retirement savings accounts and determine how much you can take out each month to ensure it lasts through all the phases of your retirement.

Early Period of Retirement (62 to 70)

The second phase of retirement is perhaps the most important. You’ll choose the exact age at which you’ll retire, which will directly impact how much you’ll get each month. If you’re setting an early retirement budget, look at how much more you’ll make if you delay your retirement to 65, 66, or full retirement age, 67. You can see those amounts for Social Security here, but also look into the repercussions of early retirement on your IRAs, 401(k) accounts, or any pensions you’ll receive.

Once you’ve worked out your post-retirement income, use expense method retirement planning to develop a preliminary budget. You can then refine that budget in the coming months as you settle into your retirement lifestyle. This is also a time you will want to spend a little extra on travel while you are active and exploring new hobbies, so keep that in mind as you work on a budget.

Middle Retirement (ages 70 to 80)

Chances are, you’ll have retired by the time you reach age 70, or at least taken Social Security, which stops increasing at age 70. By your 70s, you’ve probably gained a little experience. If at first your approach was budgeting for retirement, keep it simple, now you might want to get a little more refined in your approach.

As you’re setting up your retirement budget categories, keep in mind that you’ll eventually pass away. You should have a will and estate plan, and you might want to take some time to decide how much you want to leave behind. Make sure you’ll have enough to last, but also take some time to enjoy life. In this phase people start to settle into their retirement lifestyle and many end up spending less money than they did before age 70.

Late Retirement (80 and up)

Once you’ve reached your 80s, it’s time to take a look at your previous retirement expenditure guidelines. Your medical expenses will likely be higher, and you may eventually need regular care, either in your home or at a facility you move into.

Many people in their 80s start to see a reduction in their lifestyle spending as they become less active; however, health care costs generally become a larger percentage of spending.

Final Thoughts

Planning for retirement can be challenging, but the good news is, you don’t have to commit now. You can set a preliminary budget and refine it as you go. With the help of a Certified Financial Planner (CFP®), you can get expert advice on how best to make your income work for you at each stage of retirement.

Schedule your FREE retirement consultaton.

Our licensed fiduciaries are standing by to help you build a confident, worry-free retirement.
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Stephanie Faris
Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

Retirement Income Guide

Decumulation


Paycheck


Lifestyle Planning


Income Sources


Strategies


Taxes


Risks

Income and expenses charts

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Retirement Income Guide

Decumulation


Paycheck


Lifestyle Planning


Income Sources


Strategies


Taxes


Risks


Share this advice


Stephanie Faris
Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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To empower a confident, worry-free retirement for everyone.

Legal

Retirable, Inc. ('Retirable') is an SEC registered investment advisor. By using this website, you accept our Terms and Conditions and Privacy Policy. Retirable provides holistic retirement planning services, which are available only to residents of the United States. You must be at least 18 years of age to become a Retirable Premium user. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.

Investing involves risk and past performance is not indicative of future results. Increased spending increases the risk of depleting your savings and performance is not guaranteed. It is very important to do your own analysis before making any decisions based on your own personal circumstances.

For more information, see our Form ADV Part II and other disclosures.

Retirable is a financial technology company, not a bank. Banking services provided by Blue Ridge Bank N.A., Member FDIC. FDIC insurance is available for funds on deposit up to $250,000 through Blue Ridge Bank N.A., Member FDIC. The Retirable Visa® Debit Card is issued by Blue Ridge Bank N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

* Annual Percentage Yield (APY) of 5.12% is effective as of Aug 1, 2023. This is a variable rate and may change after the account is opened. Fees could affect earnings on the account.

** Refer to the fee schedule in your Consumer Deposit Account Agreement

© 2024 Retirable Inc. All rights reserved.

We're accredited and certified by