As the pandemic continues, it’s not surprising that consumers are more anxious about achieving their retirement goals than they were pre-COVID, with nearly two-thirds saying they feel at least some concern over how they’ll maintain their lifestyle in retirement.* If you’re looking forward to retiring at some point, one thing you can do to help alleviate that anxiety is put together a budget for retirement. Creating a budget ahead of time can give you a general idea of what your expenses and income might be in retirement — and can help you see if you’re on the right track to save the money you need. Not sure how to get started? Below are some ideas.

Envision your future

You may not know ahead of time exactly what you’d like your retirement to look like, but now is a great time to think about the options you have. Most people would like to at least maintain their current lifestyle. But what does that look like for you? If you have a spouse or partner, talk about the things you’d like to do, how you’d like to spend your time and what priorities you envision. Then, consider what it might cost to achieve those goals.

Gather your records

You already have some information you’ll need to put together a retirement budget: your current bills, invoices, pay stubs and tax returns. Look at where you spend your money now, because not everything needs to change once you retire. From those records, you can start estimating your income and expenses in retirement.

List mandatory expenses

Start by putting together a list of your potential retirement expenses. These are your fixed monthly, quarterly or annual expenses you’ll still need to pay once you retire. They could include your mortgage or rent, insurance and utilities.

Consider how you’ll live and how much that will cost

How you’ll live will affect how much you’ll spend. If you want a new car every 3 years, you’ll need to include that in your expenses. If you know you want to eat out a couple times a week, include that as well. Take some time to think about the way you live from day-to-day and estimate those essential, but variable, expenses and include an increase for inflation. You might include things such as car payments, health care, long-term care and groceries.

Include expenses for fun

List discretionary expenses such as entertainment, travel, gifts, etc. If your priority will be to see family as much as possible, and your children and grandchildren live across the country, you’ll need to budget for flights. If your priority is to stay active by playing tennis or golf, you may want to budget for your club dues, lessons and clinics. Consider the ways you’ll spend your time and how much those activities will cost.

Put together an emergency fund

No matter what stage of life you’re in, it’s always smart to have an emergency fund to pay for those unexpected expenses that can come up — like replacing an old roof or paying for surgery on a knee that’s been bothering you. An emergency fund can also come in handy if you lose your job or are between jobs temporarily. Experts often say you should have enough money to cover between 3 to 6 months’ worth of expenses set aside. So, if you typically spend $3,000 a month, you’d want between $9,000 and $18,000 in an emergency fund.

Estimate your retirement income

For estimating purposes, you can use 3%-4% of your retirement plan or IRA balance. Visit to estimate your Social Security benefits, contact your life insurance agent for an estimate of how much cash value you might have in permanent life insurance policies at retirement and be sure to include any pensions you expect to receive. Add up your annual estimated income to see how much you might have in retirement.

Anticipate your inheritance

Not everyone will get an inheritance. But, if you expect one and can estimate what it might be, you might be able to add that into the assets available for retirement. However, you never know when you’ll receive an inheritance — unless your parents or grandparents are giving gifts of money while they’re alive. In 2020, individuals can gift up to $15,000 to each person they want, without paying gift taxes, up to a lifetime maximum of just over $11 million.

Compare your expenses with your income

Subtract your expected expenses from your income to see what your outcome might be. Will you have extra money left over? Will you have a shortfall that you’ll need to address? Having money left over isn’t a problem — because you never know what you’ll need that money for. However, having a shortfall may be an issue over time, so you’ll want to consider your options. Do you work longer and retire later? Or are you able to save more between now and when you plan to retire?

Save more

If it doesn’t look like you’ll have enough money in retirement to sustain your standard of living and do the things you want to do, you might want to consider increasing your contributions to your retirement plan, or saving in an IRA, annuity or permanent life insurance policy. Consider how you’re saving money too — if everything was invested pretax in a 401(k), for example, you’ll end up paying taxes on all your retirement income. But, if you have a Roth IRA or use the cash value in a permanent life insurance policy to supplement your retirement income, you’ll be able to withdraw that money tax-free. It might be wise to have some income in retirement that’s taxed and some that isn’t.

Talk to a financial advisor

A financial advisor can help you with your budget, provide ideas about how to increase your investment growth over time, and may even make you feel more confident in your financial future. According to a recent survey, those who work with a financial advisor are significantly more likely to have $500,000 or more in assets than those who don’t, and are more likely to feel confident in the safety and security of their family, their ability to retire comfortably and maintain their current lifestyle after the COVID-19 crisis.*

*Source: Equitable Q3 Consumer Pulse Survey, October 2020.


If you are searching for answers to your financial planning questions, Contact Us.