Retirement, Budgets, and Calculators, Oh My

While it’s no replacement for meeting with a financial expert, a retirement budget calculator is a great way to “plug and play” with some numbers so you can get a better idea of how you’re doing financially. A good retirement budget calculator (Excel has some great pre-made templates!) will make it easy for you to enter information like your age, salary, savings, investment return information, etc., as well as desired retirement age and income, and then give you a bird’s eye view into what you need to achieve your goals.

But beyond using a retirement budget calculator, there are some important things to keep in mind as you start to imagine life after your career. By thinking about future and current expenses—you’ll gain better insight into how to make your post-retirement world a more comfortable one. Here are some things to ask yourself:

• How will my medical expenses change? Your health and the insurance you use to maintain it—is likely going to change after you retire. You’ll probably go from paying premiums toward a work plan that’s subsidized by your company—to paying for a Medicare plan, which you may have to supplement with private insurance to meet your medical needs as you age. In addition to paying monthly premiums, you’ll find that many Medicare plans require patients to pay more out-of-pocket money than what you might be accustomed to. In addition, the need for hospitalization and medical supplies typically goes up with age, but most insurance plans aren’t going to cover them in their entirety. All told—plan to spend at least 15% of your budget on health-care-related expenses, including Medicare premiums and out-of-pocket costs.


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• What progress have I made on my mortgage? If you haven’t paid off your home before retirement—that mortgage payment will likely be one of the largest expenses on your budget sheet. Use a mortgage calculator to see how making a few extra payments now can reduce your interest paid over the course of the loan. You may be surprised to see how quickly you can start chipping away at the principal and knock it out before you retire.
• Can I get out of debt before retirement? Aside from that pesky house payment, few things will eat into your retirement savings faster than debt. Yes, it’s money you’ve used to buy something, but interest is what will kill your ability to save over time. From car payments, to your kids’ college costs, to credit cards and beyond, start to monitor debt, make extra payments when possible, and watch it decrease over time. As you work debt down, you’ll have more money to invest in the stock market or tuck away into your 401(k) or IRA.
• What will my living expenses be? While your everyday costs will probably decrease a bit during retirement, they’re certainly not going to go away. Remember to include all the basics, like housing, transportation, utilities, internet access, cell phone bills, insurance, gas, groceries, dining out, entertainment, etc. A retirement budget calculator should be a fluid spreadsheet that can change with your cost of living, so you adjust on the fly. For example, fluctuating gas, insurance and utility prices will cause your budget to change over the years, so it’s good to update that number each year as you revisit your spreadsheet.
“While it’s no replacement for meeting with a financial expert, a retirement budget calculator is a great way to “plug and play” with some numbers.”
• How will my investments look? If only we could answer that for you! No one knows for sure—but experts say the best ways to grow and protect your money is to diversify your investments. In other words: don’t put all your eggs in one basket. Track your investments over time and adjust as needed based on how close you are to retirement. Doing the math on your own can be tricky for most of us, so it’s a good idea to work with a financial advisor to find out the best way to plan for the future.
• Will I be able to travel and keep my hobbies? Extra time means extra freedom to do the things you enjoy. But those hobbies don’t always come cheap. Include money in your budget for travel and all your other passions, whatever they may be. Remember that no two people are going to have the same priorities when it comes to fun money—so put together your own plan. Are you looking to take a big overseas trip each year? Work it into your budget. Do you want to spend your time woodworking every day? Plan to have enough money for wood, a workshop, and all the supplies you’ll need.

Taking a few minutes now to start planning ahead makes retirement more enjoyable and stress-free when the time comes. Whether you want to see how your finances shake out using a retirement budget calculator—or by talking to a financial expert—you’ll be a few steps ahead of the game.