Living on a Budget — Senior Edition

Living within your financial means can be hard for some people, especially if they’re no longer working or if they’re on a fixed income. By budgeting for expenses and taking advantage of savings and tax breaks, we can ensure financial stability in our retirement years. 

25 million older adults do not have financial security.

National Council on Aging

Planning your Living Expenses during Retirement

Your retirement years will bring more leisure time. But even if you’ve been socking money away in retirement funds, you’re still going to need to fund living expenses. So how much do you really need to spend on living expenses on a yearly basis? This number can be hard to get a handle on, but creating a monthly budget calendar is a great way to help you track actual income and expenses.

Not only does a budget calendar give you an easy way to visually track income and expenses, it will also help you to:

  • Plan ongoing expenses
  • Pay your bills on time
  • See budget shortfalls
  • Make spending adjustments

Check out this budget calendar from the National Council on Aging that’s in an easy-to-download format to get you started.

What expenses should seniors include in budgeting?

Housing. Whether you live independently or live in a retirement community, you’ll need money for monthly or yearly housing costs. Remember, if you still live in your own home and have already paid off your mortgage, you’re still on the hook for property taxes, homeowner’s insurance, HOA fees, and home repairs and replacements.

TIP: Freeze Your Property Taxes. Property taxes in Washington State continue to rise each year. However, if you’re over the age of 61, you’re in luck. Washington has property tax exemption programs for people 61 years of age and older, based on income, the value of the residence, and local levy rates. The Washington State Department of Revenue website has more information about how to access this discount.

Healthcare. Even with the fixed deductibles for Medicare Part A, B and D, you will still be responsible for other healthcare costs. Generally, things like supplemental insurance, out-of-pocket payments after deductibles, and extended hospitalizations should be considered. Don’t forget to budget for eyeglasses and hearing aids that aren’t covered at all by insurance.

Taxes. Although chances are you don’t have income tax at this point in your life, you’ll still want to be mindful of taxes on retirement savings and property. For retirement savings like 401(k) and IRA accounts, you’ll be paying income tax on withdrawals. According to US News and World Report, “Distributions from tax-deferred retirement accounts are required after age 72 in order to avoid a stiff 50% tax penalty. However, there are several ways to strategically withdraw money from your retirement accounts and reduce your retirement tax bill. Part of your Social Security benefit could also be taxable if your retirement income tops a specific threshold.” For suitable guidance, discuss this topic thoroughly with a financial planner.

Food. Eating in and eating out costs money, no matter how you dine. Go back six months to review your grocery and restaurant expenditures in real time. Be realistic about how much you spend on food each month, and accommodate for this or adjust down or up if need be.

  • Tip:  Many restaurants and grocery stores offer senior discounts. Ask around, and enjoy the savings.
Wesley U

Entertainment and Travel. Retirement brings an abundance of free time to enjoy the things you love to do. Once you know your monthly budget, you can earmark money for local entertainment and travel. Surprisingly, there are some activities that get less expensive as you age. That’s because senior discounts abound, including museum and movie admissions and even through cable and cell phone providers. And if you still love to learn, many colleges and universities in Washington offer free or heavily discounted class admissions for you to take advantage of. And don’t forget Wesley U is free for those who are 55+.

When it comes to travel, consider your overall health, mobility and energy before you start making plans! Don’t forget that seniors, AARP members , and AAA members enjoy discounts on hotels and rental cars. Take it as a sign that the world wants you to travel!

Grandchildren. Visits and lavishing gifts on your grandkids are among the most unmitigated joys of life. Be sure to factor in these trips and treats to your living budget to bring smiles to their faces and yours.

Charitable giving. Continuing to donate to your favorite non-profit takes some planning and discussion with a tax pro. For example, it could be advisable to give more during early retirement years to take a tax deduction. If you are over 70½, you can also make a qualified charitable deduction or charitable IRA rollover directly from your IRA. Read what Schwab Charitable has to say about charitable giving, and be sure to talk to your financial planner.

Emergencies. You have probably heard that three to six months of expenses is a good rule of thumb for emergencies, and this doesn’t change in your retirement years. It’s essential to set some money aside for unexpected expenses. Having your monthly budget calendar in place will help you set aside the right amount for your peace of mind. 

Fantastic Resources for Senior Discounts and Savings

Find out more about how Wesley enriches the lives of older adults in Bonney Lake,Puyallup, Des Moines, Auburn and Renton.