Don’t Outlive Your Money: 5 Budget Tips for Retirement

By Matt Stephens, CFP®

Retirement is just around the corner. This is a milestone you’ve been waiting for your whole working life. You have invested and built up your retirement savings…but now that it’s here, what exactly should you do? 

Maybe you’ll finally take that big vacation, or you just want to travel out of state to see your grandchildren, but you fear burning through funds too quickly. More than 75% of current workers believe their current retirement savings will last for 20 years or less. Even those with adequate savings are sometimes hesitant to spend big in retirement for fear of spending too much, too soon.

If this sounds familiar, let’s look at five ways to make your retirement savings last.

1. Spend Less Than You Make

My father-in-law famously used to say, “If your output is more than your income, your upkeep will be your downfall.” Keeping your spending in line with your retirement income is the key to not running out of money. But, you may be asking, how much of my investments can I actually spend every month?

This is a common question that comes up with clients as we plan for the transition from full-time work into retirement. First, we look at any guaranteed sources of income, like Social Security benefits and pensions. Then we help clients visualize how much income their investment portfolios can realistically generate. 

Based on 20+ years of “safe withdrawal rate” research, we typically recommend withdrawing somewhere between 4% and 5% of the portfolio for a 30+ year retirement. So, if you have $1M saved up, that will add between $3,000 to $4,000 of income on top of your Social Security. Of course there are tax considerations and other factors, but this is a good place to start.

For our clients, we handle all the paperwork and logistics. They get money delivered right to their bank accounts every month—just like a paycheck. Once you know how much income will come in every month, as long as you don’t spend more than this amount, feel free to enjoy it!

2. Track Expenses Instead of Budgeting

There are two kinds of people in this world: those who love budgeting, and normal people. Some of my clients create incredible, detailed budgets utilizing multiple savings accounts and expansive tracking systems. Dave Ramsey recommends using a zero-based budget. If that works for you, great! Keep up the good work.

Other clients feel like “budget” is a four-letter word. Do you find it tedious, frustrating, and limiting? Have you ever written out a budget for the next month, then nothing went to plan and you gave up? 

Try tracking your expenses and reviewing them after the fact and see if that works better. Most people who try this are shocked by their spending in a couple of categories (“We ate out a lot!”) and naturally tighten up those areas the next month. 

At the end of the day, the important thing is to spend money on things (and experiences) that line up with what’s important to you. Tracking your expenses will help you identify these areas and make adjustments as necessary. 

3. Watch Out for Large Irregular Expenses

Watch out for large expenses that only come around once or twice a year. Clients sometimes call in requesting funds on top of their regular distributions—usually for an annual insurance payment or property tax bill they forgot about. 

I’m a fan of paying these expenses once a year instead of monthly because it’s typically cheaper. My car insurance costs more than $100 extra if I pay monthly, for example. But this becomes a problem if you’ve already spent the money for this month and are facing a huge bill. 

To keep this from happening, consider still paying it as part of your monthly budget, but pay it into a separate savings account. This will smooth out your monthly expenses and when the bill arrives, the money will be there waiting. 

4. Consider a Separate Savings Account for Vacations

This strategy works great for vacations as well. If you have a $10,000 vacation coming up next year, start saving $800/month into a savings account earmarked specifically for the trip (or just stack it on top of your emergency fund if you prefer the simplicity of just one savings account). 

Some clients have a hard time enjoying the money they’ve saved, even if they have enough of it. We’ve trained ourselves over the years to save, save, save to have enough in retirement, so it can be a difficult transition to turn that corner and start spending. 

Saving up for a big vacation over time and into a separate account can make it easier to spend more freely when the time comes. It’s already separate from your “regular” money, so go spend it and enjoy it! 

5. Don’t Sweat the Small Stuff

Stick to the plan and try not to take extra withdrawals—especially in the first year of retirement (where habits are formed, both good and bad). But try not to stress over small day-to-day transactions. Do you enjoy your five-dollar cup of coffee at Port City Java? Great! That’s something you should keep doing. You don’t have to drink Folger’s alone at your kitchen table just because you’re retired and don’t have a paycheck anymore. 

The majority of our clients have sufficient retirement savings and it’s just as important to live a full life during retirement. Go visit the grandkids more. Fly first class once in a while. Get the appetizer with your meal. 

We can help you put a strategy in place that you can trust, so there’s no reason to worry. If you have questions or are concerned that your investment strategy isn’t built to last, click here to schedule a call with us. 

About Matt

Matt Stephens is a financial advisor with AdvicePoint, a financial services firm based in Wilmington, North Carolina, specializing in retirement income planning, tax-reduction strategies, and charitable planning. Matt spends his days guiding clients as they make the leap from career to retirement. He loves simplifying complex financial issues and giving unbiased answers in plain English. His team goes beyond just professional investment management with their client-focused and high-touch approach, building plans as unique as each client. 

Matt obtained degrees in business administration and communication studies from UNC-Wilmington, holds the Series 66 Investment Advisor and Insurance Licenses, Chartered Retirement Planning Counselor^SM, CERTIFIED FINANCIAL PLANNER^TM, and Behavioral Financial Advisor^TM certifications, and was a recipient of the 2019 Wealth Management Thrive Award. Outside of work, Matt enjoys spending time with his wife, Brooke, and their two young children. They attend Port City Community Church, where Matt has volunteered since 1999. His favorite pastime is surfing. To learn more about Matt, connect with him on LinkedIn.