Do Retirees Need a Budget?

Budgeting isn't just for working folks; retirees need to do it as well. 

Following a budget is one of the best ways to track your spending and ensure that you're not putting yourself at risk of racking up excessive debt. That's why all working folks should have a budget that's easy to follow and realistic. But what if you're retired? Do you still need a budget?

You absolutely do. In fact, having a budget could be more important once you're no longer working.

Why retirees need to budget

Most people move over to a fixed income when they retire. That income could be a combination of Social Security benefits, retirement plan withdrawals, or pension payments if you're eligible to collect them. You might even have some cash sitting in a savings account that you can withdraw as needed. 

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.85% APY for balances of $5,000 or more Rate info 4.85% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.85% APY for balances of $5,000 or more Rate info 4.85% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of September 12, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of September 12, 2024	Min. to earn $0

To clarify, a fixed income isn't always absolutely fixed. Let's say there's a certain amount you can safely withdraw from your IRA or 401(k) each month without running the risk of depleting your savings.

If your investments do well, you may be able to start withdrawing a larger monthly amount without hurting yourself on a long-term basis. Similarly, you might choose to work for a few months here and there during retirement to generate extra cash.

So your income during retirement may not be totally fixed. Rather, it's probably fixed to some degree. But if you get the bulk of your income from Social Security, you're mostly talking about a fixed amount of money.

That's why you need a budget during retirement. Without one, you risk falling behind on your expenses and taking on debt later in life. And that's dangerous.

Setting up your retirement budget

If you've never followed a budget before, you may be wondering how to set one up. The good news is that budgeting is easy. All you do is list your recurring monthly expenses, factor in once-a-year expenses (perhaps an AARP membership or something similar), and compare your total living costs to the amount of money you have access to.

If your monthly income is enough to sustain your current level of spending, you're in pretty good shape. Ideally, you should have a little wiggle room in case unplanned expenses pop up. But if you find that you're spending too much, you may need to rethink some expenses.

The easiest ones to target are housing and transportation since they're likely to eat up a large chunk of your income. Downsizing to a smaller home could save you a substantial amount of money on rent -- or property taxes, insurance, and upkeep if you own a home. Similarly, if you have easy access to public transportation where you live, selling a car could free up hundreds of dollars a month on auto insurance and maintenance.

Cutting back on smaller expenses can help, too. That might mean downgrading your cable plan or cutting back on restaurant meals (even those early-bird specials cost more than home-cooked food). The key is to know where your money is going month after month and to not overspend.

Budgeting is just as important for retirees as it is for working folks -- if not more so. Take some time to set up your budget and stick to it. In doing so, you'll avoid the financial stress many other seniors face.

And if you're not sure how to create a budget, be sure to check out our full guide to budgeting.