How to Create a Retirement Expense & Budget Worksheet

If you want to get a jump-start on planning for retirement, you need to understand your financial needs and figure out what you must save to achieve your retirement goals.

At Addition Financial, our members sometimes ask us what they should do to plan for retirement. There are multiple steps to take, of course, but one of the most important is to create a retirement budget worksheet to help you control your spending and track your expenses.

You might need some guidance to create a retirement expense worksheet that will work for you. Here’s what you need to know.

Gather Necessary Documents

The first thing you’ll need to do is to gather documents that will help you get a handle on your income and spending. These should include:

  • Your most recent bank statements – A minimum of six months is essential, but you may want to expand that to 12 months
  • Your most recent credit card statements – Again, a minimum of six months and a maximum of 12
  • If you are employed, the last two pay stubs for you and your spouse
  • Last year’s tax return
  • Highlighters to help you keep track of things

The highlighters can help you identify and track categories of spending and income, which will make it easier for you to put them into your worksheet.

Identify Your Fixed Expenses

You might be years away from retirement. If you are, it can be difficult, or even impossible, to predict what your fixed expenses will be. However, you can still set up a retirement budget worksheet and work on figuring out what you’ll have and how much you can spend on fixed expenses.

Fixed expenses include regular monthly, quarterly and annual expenses you’ll need to have to live. These include:

  • Rent or mortgage payments
  • Groceries
  • Clothing
  • Utilities
  • Health care

You should also include non-essential monthly expenses, which include:

  • Gym memberships
  • Cable TV
  • Internet
  • Subscription services

Finally, you’ll need to identify non-monthly but required expenses, things like:

  • Insurance premiums
  • Property taxes
  • Automobile registration
  • Warranty extensions

You can decide how to categorize these things, but you’ll need to be able to identify them at a glance.

Estimate Your Health Care Costs

One of the biggest expenses you’ll face in retirement is paying for health care and health insurance. It’s safe to assume that the cost of health care will continue to increase. It typically outstrips inflation and can add up quickly.

In addition to medical costs, you should consider dental, vision and hearing care. All three become increasingly important as we age. Failing to take the rising cost of health care into consideration can leave you without enough money to pay your other expenses.

Medical expenses may be particularly burdensome if you choose to retire before you are 65 years old. If that’s the case, you’ll be paying for non-Medicare health care. You can use the AARP’s calculator to estimate your expenses. Find it here.

Expert Strategies for Setting and Sticking to Your Retirement Goals

Calculate Your Fixed Costs by Month

The next step is to put your fixed costs where they belong. We recommend creating a column for each month. If you know your electric bill is about $100 per month, you can put $100 in each column. Occasional expenses, like holiday shopping, should be entered in the appropriate month.

You can use your credit card statements and bank statements to adjust these expenses as needed. For example, if you pay more for electricity during the summer because your home has central air conditioning, you’ll need to account for that in the summer months.

Build Money in for Extras

Next, think about the extra things you want to have money for. These might include:

  • Travel
  • Hobbies
  • Entertainment
  • Outings by yourself or with your grandchildren

You’ll need to think about how much time you want to spend doing these things, and how much money you’ll need to do them. You can divide your discretionary income by 12, although your spending may vary from month to month.

Enter Your Monthly Income

Now that you have your expenses categorized and sorted by month, the next step is to calculate your monthly income. Income may come from investment accounts like 401(k) accounts and IRAs, Social Security and pensions.

There are variables here, of course, but be as precise as you can. Your monthly income must completely cover your fixed expenses and leave you money to do the things you love to do.

Adjust as Needed

The final step to creating your retirement budget worksheet is to adjust it to suit your retirement goals. If you have expensive hobbies, you may need to compromise in other areas. For example, would you be willing to downsize to a smaller home? Get by with a streaming service instead of cable?

Asking these questions now will ensure your budget is accurate, and you have the money to enjoy your retirement when the time comes.

Planning for retirement can be challenging. Creating a retirement expense and budget worksheet can help you predict your income and expenses and ensure you’re ready for retirement.

To learn more about Addition Financial's retirement services, please click here now.