How to Create a Retirement Budget That Actually Works

Start with Your Current Spending

The easiest way to estimate retirement expenses is to start with what you spend now. Look at 3-6 months of bank and credit card statements. Categorize everything: housing, food, transportation, healthcare, entertainment, travel, insurance, and miscellaneous.

Then adjust: you'll probably spend less on commuting and work clothes, but more on healthcare, travel, and hobbies. Most retirees find their spending is about 70-85% of pre-retirement levels — but the first few years often run higher due to 'honeymoon phase' spending.

The Expenses People Forget

Home maintenance and repairs ($3,000-$8,000/year). Healthcare beyond Medicare ($5,000-$10,000/year per person). Property insurance increases (especially in Florida — costs have doubled in some areas). Gifts and helping family members. Inflation — 3% annual inflation means your expenses will double in 24 years.

Fixed vs. Discretionary Spending

Separate your budget into fixed expenses (housing, insurance, healthcare, food) and discretionary expenses (travel, dining out, hobbies). Your guaranteed income (Social Security, pension, annuity) should cover 100% of fixed expenses. Discretionary spending can come from savings and investments.

This is the 'income floor' strategy, and it's the foundation of every retirement plan we build at ACM. When your essentials are guaranteed, you never have to worry about the stock market affecting your ability to pay bills.

Review and Adjust Annually

A retirement budget isn't set-and-forget. Review it every year. Healthcare costs change, insurance premiums adjust, and your spending patterns evolve. We review our clients' plans annually to make sure their income still matches their expenses.