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Budgeting on a fixed income can be challenging, but millions of retirees do it successfully every year. To help you plan for retirement, GOBankingRates spoke to Dianne P., a 68-year-old retired teacher, who shared her real monthly budget and strategies for living comfortably in her golden years.
From housing and health care to entertainment and savings, this overview provides real-world insight into managing expenses after leaving the workforce, as well as tips on how to set a retirement budget without compromising your lifestyle.
Fixed Income: $2,850
“Everyone talks about saving for retirement, but no one tells you how much it will cost to live once you get here!” Dianne said. Here, she breaks down the specific numbers.
“I receive $2,850 in Social Security benefits each month, plus $2,200 from my teacher’s pension. I also withdraw about $1,500 monthly from my retirement accounts, which still have about $580,000. To make sure my money stays put, I try to follow the 4% rule for withdrawals,” she explained.
Accommodation: $1,650
Dianne loves her tiny house and plans to live in it for a long time to come.
“I paid off my house last year, thank God! But property taxes, insurance and utilities are still going up. Heating in Michigan winters isn’t cheap,” she said.
Healthcare: $875
For Dianne, health care is one of her biggest (and most significant) expenses.
“The Medicare Part B premium takes $174.70, right on top of my Social Security,” he said. “Then there’s my supplemental insurance, prescriptions, and dental care – nothing is really ‘free’ in retirement!”
Groceries: $600
Dianne said she didn’t like cooking when she was younger, but now it’s her passion.
“I’ve become quite creative with meal planning. My friends and I have started a dinner club where we cook for each other once a week,” she said. “It saves money and keeps us social!”
Transportation: $200
Diane’s car has been paid off, but she still spends a huge chunk of money on it every month.
“My car is paid off, but insurance, gas and maintenance are still due,” she said. “I try to combine errands to save on gas – prices are crazy these days!”
Entertainment and Hobbies: $400
In her own words, Dianne refuses to sit at home all day.
“Between my yoga classes, book club memberships (I have two kids and they buy books for us!) and the occasional movie with friends, staying active is worth every penny,” she said.
Travel: $300
Diane is ready to travel to meet the people who matter – and she’s even saving up for a trip to Costa Rica.
“I set aside money every month to visit my grandchildren in Colorado. Having a dedicated travel fund means I never have to miss important moments,” she said.
Emergency Fund: $200
No matter what, Dianne learned to replenish her emergency fund.
“After my water heater broke last winter, I learned the hard way about having emergency savings. Now I save a little bit each month,” she said.
Miscellaneous: $400
Dianne also sets aside a small amount of money for things she doesn’t think about regularly.
“There’s always something — haircuts, gifts, clothes, those little things you don’t think about until you need them,” he said.
add it all up
Dianne said her monthly expenses are a little less than $5,000, although they vary from month to month. However, this usually saves him some money. “I keep that extra amount as a buffer or add it to my emergency fund,” she said.
And for those looking to retire, consider this advice from Dianne. “Keep track of everything for at least three months before you retire,” advises Dianne. “And add 20% to whatever you think you’ll need – there are always surprise expenses!”