Are you worried about running out of money in retirement? It’s a common concern. Many people find that retirement is more expensive than they expected, leading to fears that they won’t have enough money. If that sounds familiar, it’s time to take another look at your retirement budget.
Retirement Costs Add Up
If you’ve paid off your mortgage and you no longer have to worry about the clothes, lunches and transportation costs associated with work, you might think that you can live on a modest budget in retirement. However, unexpected costs can make it hard to stay within your means. If you want to actually enjoy your retirement, you’ll need to spend money on entertainment and travel, and that can add up. Retirees also face high healthcare and long-term care costs, as well as the potential for unexpected tax bills.
A 2025 Retirement Confidence Survey from the Employee Benefit Research Institute found that 45% of retirees say their overall expenditures are higher than they expected. For 15% of retirees, costs were much higher than expected.
When you’re on a fixed budget, going over budget can spell financial disaster. Even if you’re doing all right now, you might find yourself in financial straits five, 10 or 20 years from now. Don’t wait for that to happen. Take steps now to fix your retirement budget.
1. Recalculate Your Budget
If you’ve underestimated your retirement expenses, it’s time go back over your budget with some more realistic numbers. And if you never created a detailed budget in the first place, there is no time like the present.
Realistically, how much are you spending each month on the following?
- Housing
- Utilities
- Food
- Clothes and Personal Items
- Insurance
- Out-of-Pocket Medical Expenses
- Transportation
- Entertainment
- Travel
- Taxes
- Other
2. Don’t Forget about Inflation
When you’re creating a long-term retirement budget, you need to account for inflation. You may be able to get by on $4,000 a month now, but 10 years from now, that money won’t go as far. If your budget doesn’t account for this, you’ll find yourself going over budget more and more with each passing year.
The average annual inflation rate is around 2% to 3%, but some years can see much higher inflation. This means you’ll need to increase your budget by about 2% to 3% each year just to maintain the same quality of living.
3. Calculate Your Shortfall
Once you know how much you’re spending and how much more you can expect to spend due to inflation, you can determine exactly how much you’re going over budget. This information will be crucial as you figure out a way to fix your budget.
4. Look for Areas to Cut Costs
At this point, you should have a good idea of how much you need to trim from your budget to stay on track financially. It’s time to think about where you can cut costs. You still want to be able to enjoy your retirement, but you need to do so in a way that’s sustainable.
Here are some strategies that might work.
- Changing your habits. Little things can add up quickly. For example, if you’re going out to eat a few times a week, you could easily spend hundreds of dollars each month. Reducing how often you go out could be an easy way to stick to a budget.
- Drawing boundaries. If you’re still supporting your adult children, it may be time to close the Bank of Mom and Dad and put your own retirement first. Have a frank conversation with your family and explain what you can and can’t do.
- Moving. Downsizing to a smaller home or moving to a less expensive area could be a good way to save a significant amount of money.
- Asking for discounts. Many businesses offer senior discounts. If you’re not taking advantage of these discounts, it’s time to start.
- Using free resources. Some forms of entertainment and hobbies are expensive, but there are inexpensive and free ways to enjoy retirement. See what free services are available at your local library and senior center.
5. Reassess Your Budget
Once you’ve worked out a new budget, you’ll need to reassess it every year or so to see if it’s still working. If you’re still having trouble sticking to a budget in retirement, it may be time to think about other strategies, like finding a new source of retirement income.
Want more tips on how to live your best retirement life? Subscribe to news alerts from Silver&Smart.
