By Paul Bullock

After the past few years being marked by unprecedented change and unpredictability, the idea of retirement may seem more appealing than ever. Throughout this difficult period, you’ve persevered, diligently working day in and day out, as you have for decades. Likely what keeps you motivated is the anticipation of the day when you’ll finally bid farewell to your office (or home office) for good. 

However, rather than eagerly looking forward to the golden years of retirement, nearly half of all Americans have concerns about depleting the hard-earned savings they’ve accumulated over the years. Even if this concern isn’t currently keeping you awake at night, you may feel a strong inclination to prepare for retirement so you can have a stable future.

To have a sense of control over your finances in retirement, a well-structured budget is not just valuable—it’s the cornerstone of effective personal financial management. In this article, we explore three budgeting tips aimed at boosting your financial confidence as you embark on and savor your retirement journey.

1. Identify Flexible Spending Categories

As you build your budget, organize it based on needs. Every single expense should be identified as either fixed or variable and essential or non-essential. For example, your housing expenses are likely fixed and essential. Food is essential, but it is a variable expense. A gym or country club membership may be fixed, but it is non-essential. Other forms of leisure or travel are likely variable and non-essential.

Knowing which expenses are necessary and which are flexible can relieve some of your concerns going into retirement. If you’re used to spending $8,000 a month, once you sort your expenses and discover that only $4,500 of them are truly necessary, it relieves a lot of pressure. 

Identifying these spending categories also allows you to make wiser financial decisions and adjust better to market conditions. If we enter a bear market and your portfolio is down, you can cut spending back to cover the necessary expenses you identified. Maybe you put off that big trip or eat out less. This can potentially keep more of your money invested so you can be better positioned if and when the market bounces back.  

2. Plan for Taxes

Unless all your money is in an after-tax account or Roth IRA, you’ll have to deal with taxes in retirement. Having your mortgage paid off before retirement is a common—and excellent—goal. However, don’t make the false assumption that no mortgage equals no payments. 

Part of your monthly mortgage payment may be going toward property taxes and homeowners insurance if you escrow. Don’t forget that you still have to pay these bills when your home is fully paid off, and these figures must be included in your budget (and remember that these numbers will be inflating over time as well). One way to handle property taxes and homeowners insurance in retirement is to set aside money every month, just like you did with your mortgage. This way, you will have the funds available when those bills are due.

Property taxes won’t be the only taxes you’ll owe in retirement. Distributions from 401(k)s and IRA accounts will most likely be considered taxable income. Even your Social Security benefits may be taxable, depending on your overall income. It’s critical that you withhold and pay the proper taxes so you don’t get into a large tax bill situation. A competent tax preparer can help with this.

3. Work With a Trusted Financial Professional

However, collaborating with a tax preparer alone during your retirement isn’t enough. It’s equally important to receive the services of an experienced financial planner, as this can be a pivotal factor between a retirement characterized by anxiety and stress, as seen in the above mentioned 49% of Americans, and one marked by confidence.

Having a financial advisor assist you in managing your investments during this next life stage is wise, but the support should extend beyond that. Your financial ally should oversee not just your money but your entire financial well-being.

At Wellington Investment Advisors, our team is dedicated to creating a comprehensive financial plan that takes into consideration your short-term and long-term goals, a sustainable budget, and a holistic road map to guide you through retirement. If you’re interested in partnering with a professional who prioritizes your passions and dreams over just investments and wealth, please don’t hesitate to contact us. Schedule a no-obligation introductory meeting or reach out to me at paul@wellingtoninvestmentadvisors.com or by phone at (812) 333-0874. Your financial peace is our top priority.

About Paul

Paul Bullock is CEO of Wellington Investment Advisors, an independent, boutique fiduciary firm serving pre-retirees and university faculty across Indiana. With over 34 years of financial experience, Paul is committed to building long-term relationships through thoughtful, personalized investment advice and guidance. He focuses on a disciplined tactical asset allocation approach to money management through a strong understanding of economic and market conditions and strives to build trust with clients by providing sound guidance. Paul understands the hard work his clients have put in to arrive at where they are today and wants to see them succeed in their goals for the future. Paul graduated from the University of Texas with an MBA, as well as a bachelor’s degree in finance, and has been dedicated to assisting clients with their financial needs ever since. When he is not working, Paul enjoys time with his family and is also an avid equestrian polo player who helps raise money for over 18 different charities through his playing. To learn more about Paul, connect with him on LinkedIn.