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Retiring can be an intimidating step, no matter what age you are. Stretching a limited income to cover all your expenses is tough. But Eleanor Clark has figured out how to live comfortably on her retirement budget.
When Eleanor Clark retired at 65 after a long career as a therapist, she knew she would need to be prudent with her finances. With Social Security and a 401(k), she made a monthly budget to live frugally but comfortably.
Here’s her monthly budget and how she makes the most of it:
Retirement Budget
- Housing: $1,800
- Utilities: $250
- Cable/internet: $50
- Phone: $75
- Streaming services: $25
- Car Insurance and gas: $250
- Groceries: $250
- Dining out: $200
- Healthcare and prescriptions: $600
- Miscellaneous: $500
Tracking her spending before retirement gave Clark the info she needed to build a realistic budget that she could live on.
“I’ve tracked my income and spending in the same spreadsheet for years,” said Clark. “Having these numbers helped me identify costs that stayed the same versus ones that changed every month.”
When planning a retirement budget, the first step is determining your sources of income. For Clark, this consisted primarily of Social Security and withdrawals from retirement savings.
“My primary source is Social Security, which comes in at around $1,500 a month,” said Clark. “To supplement that, I also draw from my retirement savings, taking out about $2,500 per month.”
With a total monthly income of $4,000 from these two sources, Clark has a moderate base to build her retirement budget around. When she withdraws $2,500 from her 401(k) each month, she is following the 4% rule. This rule is a simple guideline that suggests you can safely take out 4% of your savings every year to cover your living expenses without running out before the savings are gone. This ensures that, ideally, your savings will last throughout your retirement years.
Housing
For most retirees, housing costs will be one of the largest regular expenses. Housing can include not just your mortgage or rent, but other essential costs as well, such as utilities.
“My current apartment costs $1,800 a month, which might seem steep,” she said. “But it offers amenities like a gym and a community center, saving me on gym membership and entertainment costs. I’ve also become friends with a lot of my neighbors, which is another benefit.
Utilities add another $150, bringing Clark’s total housing costs to $1,950. Choosing housing with amenities that suit her lifestyle helps her make the most of her living situation. Apartment living may not suit all retirees, but her experience shows the advantages of selecting the right housing fit for you.
Getting Around for Less
In retirement, transportation is often one of the largest expense categories, behind housing. With today’s high gas prices, finding ways to reduce driving costs is key.
“I’ve cut back on driving significantly,” said Clark. “I mostly use my car for grocery trips. And when I go out with friends, we usually carpool.”
By minimizing extraneous driving and consolidating trips, Clark keeps her transportation costs down. Carpooling with friends for social activities further reduces miles. With car insurance and gas, her expenses come out to $250 monthly.
Food
Food is both an essential need and central to lifestyle enjoyment in retirement. Clark has devised a balanced approach to keep food costs contained while still allowing flexibility for dining out.
“Groceries cost around $250 a month, and I enjoy a restaurant meal with friends about once a week for $50.” said Clark. “Dining out is a happiness of mine, so I make sure to budget for it!”
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With at-home meal preparation and senior discounts when she eats out, she keeps grocery costs to $250 while budgeting $200 a month for restaurant meals.
Clark’s food budgeting strategy illustrates that retirement goals and spending don’t have to be rigidly restricted. Allowing for flexibility and modest indulgences, balanced against mindful everyday spending, can help make a fixed income feel more livable.
Budgeting for Healthcare
An essential priority in any retirement budget is accounting for healthcare expenses.
“Medicare takes care of a lot, but there are still copays, deductibles and prescription medications to factor in,” said Clark. “I budget around $600 per month for these expenses.”
Even with Medicare coverage, retirees still face significant out-of-pocket healthcare costs. These should be kept in mind for those planning ahead for retirement and retirees who may be reworking their budget.
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