You Spend Too Much
We all do, before, and probably during, retirement. Employee Benefit Research Institute studies found that 46% of retired households spent more annually in the first two years of retirement than they did just before retiring.
“Ideally you’ve already started preparing a budget prior to entering retirement, but it’s critical to help you understand how to live within your means and not run out of money,” says Schwab-Pomerantz, who offers this simple retirement-budgeting strategy:
- Step 1. Add up your monthly expenses – factor in taxes and extras such as long-term health care.
- Step 2. Separate these expenses into two groups – nondiscretionary (the must haves) and discretionary (the extras).
- Step 3. Tally up all sources of income other than your portfolio, such as Social Security, pensions, salary or real estate.
- Step 4. Subtract your expenses from your income to see what your budget should be.
