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How to Budget Comfortably on a Fixed Income in Retirement

Mature couple rowing together in a canoe.

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According to a survey by Greenwald Research, 52% of workers have calculated how much money they’ll need in retirement and have started to save more as a result. Given that one-third of those surveyed say they have less than $50,000 put away in savings and investments, now is a good time to begin to systematically tuck funds away.

How much money we end up with in retirement may vary. What matters is making the money we have work for us. Here are some ways to make that a reality.

Create a comprehensive financial plan

Add up all your sources of income. Include Social Security, pensions, and any investment income you expect to have in retirement. The first step in developing a budget that fits is knowing how much money will be coming in each month.

Next, create a detailed budget. It’s fine to put pen to paper, but if it’s easier, there are also great budgeting apps that make it easy to track where your money is going. Include all your regular expenses, including housing, utilities, transportation, food, and healthcare.

Once you have your essential expenses plugged into your budget, figure out how much you’ll have left over each month for extras, like dining out, travel, and entertainment.

Make the numbers work

Does it all fit? Is your income high enough to cover your expected expenses? If not, you have options, including the following.

Jettison debt

Ideally, you’ll go into retirement with little or no debt. If you currently carry an auto loan, credit card debt, or personal loans of any kind, double down on your efforts to pay those off before your retirement date arrives.

Plan for emergencies

One of the most basic rules of personal finance continues to apply throughout retirement: Have a solid emergency fund in place. That way, if your roof needs repairs, your car’s transmission fails, or you must make an emergency trip out of town, you’ll have enough money in savings to cover the expense instead of putting it on a credit card and getting tangled in high-interest debt.


If you will have your mortgage paid off in full before retirement, congratulations! The rest of us will need to find a way to keep our monthly payments as low as possible. One possibility is refinancing the loan when interest rates drop. Suppose you originally took out a mortgage with a 5.5% APR to purchase a $400,000 home. On a 30-year mortgage, your principal and interest payment would be $2,271 per month.

As you get closer to retirement, the average interest rate drops to 4%. What’s better, you’ve had the mortgage for years and now owe $275,000. If you were to take out another 30-year mortgage, your principal and interest payment would drop to $1,313 per month, cutting $958 from your monthly budget.

Decide if a move is in order

Maybe once you’ve retired, you would rather sell your home (if you own one) and downsize into something easier to manage. Or maybe you want to move closer to family. In either case, relocating to a less expensive area can save you money on everything from gasoline to groceries. You don’t necessarily have to move to another state. Look around your area for less expensive cities in which to reside.

Moving is not for everyone, but if it’s something that interests you, it’s worth examining.

Turn a hobby into a money-making venture

Some folks want to retire knowing they can do anything they want at any time, and that’s great. But if you crave a bit of structure, you can ease financial discomfort by turning a hobby into income.

There are plenty of us who have never learned to knit but would love to purchase knitted items to give as gifts. Many of us don’t know the first thing about hanging a light fixture or repairing a garbage disposal. Knowing there’s a handyperson nearby to call in a pinch is comforting, and we’re willing to pay for their expertise.

If there’s something you truly enjoy doing — whether it’s teaching a foreign language or training dogs — consider offering that service to others who need the help. Not only will you earn money, but you’ll also keep your social skills sharp.

By the time you retire, you will have spent much of your life working hard. Today is a good time to begin planning for those years to be comfortable and rewarding.

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