Living Off of Your Savings: How to Create a Retirement Budget, Ep # 129

Have you created a retirement budget? That’s what we’re going to cover this week on Retirement Starts Today. The month of March brings a change in format for us. We are going to try a monthly series format. The theme of this month’s series is Living Off of Your savings. For the entire 5 week month, we will cover different topics under this umbrella. Here’s how it will look: 

  • Week 1 – How much do I need? 
  • Week 2 – How much do I have? 
  • Week 3 – How do I deal with an uncooperative market?
  • Week 4 – How do I turn assets into income?
  • Week 5 – How do I handle taxes?

After we wrap up the month we’ll cap the theme off with a webinar. Let’s dive in and get started by learning how to create a retirement budget. 

Have you created a #retirement budget? That’s what we’re going to cover this week on #RetirementStartsToday. Click To Tweet

Outline of This Episode

  • [2:12] Budgeting in retirement
  • [3:44] The super simple way to budget
  • [6:23] How do you get health insurance before age 65 in retirement?
  • [9:00] If you have access to COBRA, it will last 18 months
  • [10:45] Start with the foundation then add in the fun
  • [14:22] Sometimes close enough works fine

Budgeting for retirement

There are 2 easy ways that I like to teach budgeting for retirement. The first way requires you to download your spending from your checking account into Excel. Next, you’ll separate the transactions by months. Then, skim the results and remove any one-off items like paying off a car, or buying a new refrigerator, or making a charitable contribution. Lastly, divide by 12. Now you have a super simple budget to get you started with retirement planning. 

There are 2 easy ways to create a #retirement budget. Listen in to find out what they are. Click To Tweet

Super simple retirement budget plan #2

The second way to create a retirement budget is even easier than the first. Look at your current net income, the amount that gets deposited directly into your account twice a month or so after everything has already been deducted. This is the amount of money you are used to living on unless you have been saving in addition to what is already directly removed from your paycheck or you have built up credit card debt. What makes this method so easy is that it’s the amount that you are already using to live on. Listen in to find out how to add in vacations and why your budget shouldn’t be written in stone. 

But what about health insurance?

One of the biggest questions Americans have about retiring before the age of 65 is how much will health insurance cost once they retire? This can be so tricky to answer accurately. Think about whether you will be using COBRA or the healthcare exchange. If your income is below $68,000 then you could qualify for a premium subsidy. You can use this subsidy calculator to see how much of a subsidy you could receive. If you don’t qualify for a subsidy then you’ll want to use your company’s COBRA plan for 18 months. This premium could cost 102% of the total current cost, including your employer’s share.

The most important thing to remember about creating a #retirement budget is, to be honest with yourself. Find out why you shouldn’t lie to yourself in your retirement budget by listening to this episode of #RetirementStartsToday.  Click To Tweet

Honesty is the best policy

The most important thing to remember about creating a retirement budget is, to be honest with yourself. Underestimating your budget in retirement can really hurt you. If you are not honest about how much you really need, you may end up retiring before you are ready. Once you are out of the workforce it is so hard to get back in. Your budget doesn’t have to be exact, close enough will work too, as long as you’re being honest. Tune in next week to consider how to turn your entire retirement portfolio into a monthly income. 

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