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Planning for retirement budget

How You Can Plan Your Retirement Lifestyle

Retirement should be a time for you to relax, enjoy your life, and take advantage of your years of hard work. However, you need to plan your retirement properly so you can afford your expenses and the lifestyle you wish to live. Each person’s retirement will be different and preparing a unique plan for yourself is crucial.

Determine Your Retirement Age

A lot of people want to continue working until they’re 65, many people want to keep working after that age, and many want to retire earlier. Each person is different. Your retirement age will depend on many factors. Some of these factors will be in your control (such as if you enjoy your job and want to keep working) and some will not (such as health concerns or company layoffs). However, even though you won’t be able to control everything regarding your retirement, you will still want to do your best to determine what your retirement age will be. After all, this will determine how long you will need to live off retirement savings and other income.

Understand What Income You’ll Have

There are various ways that people can support themselves financially during retirement. Some of these ways include government pension plans, RRSP savings, employer pensions, savings in TFSAs or other accounts, and other methods. Take the time to figure out which of these sources you expect to receive income from when you retire, and how much you expect to receive. If you are planning on working part-time in retirement or taking on contract work, figure out how much these roles will pay and how long you will do this.

Reduce or Eliminate as Much Debt as Possible

Going into retirement with debt can be difficult. After all, once you retire, you’ll likely be living on a much more fixed income than you were when you were working. Paying off as much of your debt as possible before you retire will give you comfort and flexibility when you’re retired.

While you’re still employed, make a dedicated effort to reduce your debt. You’ll be happy you did when you reach retirement.

Plan for How You’ll Spend Your Time

Think about how you’re going to spend your retirement. What you plan to do while you’re retired will affect your budget. For instance, if your goal is to travel, then you’ll need to make sure that you’re putting enough money aside each month for this to be possible. If you have expensive hobbies, calculate the cost of these hobbies and make sure it fits into your budget.

If everything doesn’t add up financially, it will be time to think about your priorities. Some people might choose to spend their money in one way while others will want to spend it some place else. Do what works for you.

Create a Budget

Having a budget is important for everyone, and it’s no different for those who are retired. Your costs and expenses will likely change once you stop working (for example, you may not spend as much on gas if you’re not commuting to work, or you might not have to spend as much on clothes if you’re not going into the office) so it’s a good idea to do a new budget. Some costs may increase as well, such as money spent on hobbies or travel. Your budget can help you deal with these changes.

  • Fixed Costs
    • Fixed costs include things that you can’t easily change, such as rent/mortgage payments, utilities, property taxes, insurance costs, etc.
  • Variable Costs
    • Variable costs are basically everything else from food and transportation to entertainment and travel. Some of these costs are necessary (since you can’t live without food, for instance) and some are not. However, even the necessary costs can be reduced to a certain extent if needed.
  • Health Care Costs
    • You may have increased health care costs in your retirement. Not only will you be older but, if your employer previously provided health insurance, you might be expected to pay for more of your own costs now that you’re no longer working. However, depending on your age and where you live, there may be some government benefits available as well.

Once you have calculated all your expenses, you’ll need to make sure that you can afford to pay for all of them on your retirement income. If you find out that the numbers don’t balance, you’ll need to make some cuts.

What you choose to spend money on in retirement is up to you, but you’ll want to make sure the numbers balance.