One of the most important aspects of near-retirement planning is to understand how much your retirement will cost. Too many retirees overlook creating a budget to ensure they will have enough to fulfill future needs. Here are a few ways to prepare a retirement budget plan:


A top-down budget plan starts with household revenue and regular savings. Using this method, near-retirees identify their income and then subtract deductions and regular savings to estimate living expenses.

For example:


Gross Income:                                   $100,000

Payroll Deductions:                         ($ 30,000)

Annual Ret Contributions:            ($ 15,000)

Before Retirement Budget          $ 55,000


Then the budget estimate would be adjusted for changes unique to the retirement years (i.e. more travel, lower cost of living, paid mortgage).

Before Retirement Budget:         $ 55,000

Travel P/Yr:                                         $   7,500

Paid Mortgage                                  ($12,000)

Cost of Living 10%                            ($ 5,500)

Retirement Budget Estimate      $ 45,000



Another way to estimate your retirement budget is to analyze the last 12 months of your finances. This can be done by looking at your records and adding up your expenses for the year. Items that are considered “one-time” expenses should be excluded.

Total Expenses for Year:                               $ 47,000

Paid One-Time Expense:              ($ 5,000)

Budget Estimate                               $ 42,000

Then you would adjust for changes to expenses (positive and negative) to arrive at a retirement budget estimate.

Knowing your retirement needs and aspirations will prove to be a valuable first step for developing a plan for retirement.