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Spending Budgets Change in Retirement

What are some of the changes you can expect in retirement? Sleeping in past 8 a.m.? Shopping during regular business hours? Retirement can bring many changes, but one you should be aware of is how your spending could change.

According to an Employee Benefit Research Institute (EBRI) study, average spending goes down in retirement, but not for everyone. Some households’ expenses stayed the same while others increased. In the first two years of retirement, almost 46 percent of households spent more than what they had spent just before retirement. EBRI offered a suggestion for this trend – people may want to splurge on hobbies or vacations during the first few years of retirement.

Keep in mind, the EBRI study is meant to understand trends in retiree spending, but it brings up a good question. Have you thought about how you’ll spend money in retirement?

Prepare a Post-Retirement Budget

As you get closer to retirement, you may be saving and investing more to meet your financial goals. Making the switch from saving to spending in retirement can be easy if you plan ahead. By looking at how you spend your money now, you can get an idea of how to spend your money in retirement.

When you set a post-retirement budget, look at what your expenses currently are. Don’t forget to include periodic expenses, like car insurance payments or property/school taxes. Track how you spend your money over a month or two. Then, consider your current monthly income and your post-retirement income. Your current monthly income should cover your current expenses, so estimate what your post-retirement income will be. If your post-retirement income is less than your current income, you might want to adjust your expenses or even your retirement plans.

These worksheets can help you prepare a budget and list out your post-retirement income sources. Print them out and start planning ahead for post-retirement spending.

Monthly budgeting worksheets (PDF)

Monthly Worksheets (PDF)