Retirement can be one of the most enjoyable times of your life, allowing time for many activities you may otherwise not have been able to pursue. However, even during retirement, it’s important to create and stick to a budget in order to ensure that you will be able to live comfortably throughout the entirety of your old age. Here are some tips for effectively planning how to spend during your retirement, and things to take into consideration when deciding what to spend money on.
Plan Your Retirement in Stages
Creating a spending plan based on the different stages of retirement you are likely to experience allows you to adjust your income and spending calculations based on changing circumstances. If, for example, you plan to keep working part-time or in a different career during early retirement, you can help avoid depleting your savings and plan more leisure activities. You should also take into consideration that out-of-pocket medical expenses are likely to increase as you age, and consider a health savings account or something similar in order to prepare for any medical emergencies.
Consider How Much You Need
While it’s historically been recommended that you withdraw approximately 4% of your savings annually, new research has shown that 3% may be more prudent. It’s also sometimes preferable to take monthly withdrawals as opposed to yearly ones, to decrease the likelihood of superfluous spending. As normal, calculate your budget with essentials like food, transport, and utilities, and then factor in recreational spending. Once you have a goal in mind for how much you’d like to withdraw and spend monthly, create a plan to help you stick to that budget.
Plan Around Your Interests
Having much more free time means that you can devote yourself to pursuits you find truly interesting. Make sure to consider what you want to do for fun during your retirement and how you want to do it, whether it’s volunteering, working on creative projects, or something else. You may even be able to turn your hobby into a source of income if you’re inclined, and factor that into your retirement budget.
Ultimately, retirement is about pursuing those things that most interest and excite you. Make sure to leave space for those activities in your budget, and build your spending habits around allowing you to do the things you find enjoyable.