How to Budget for Retirement

As the pandemic continues, it’s not surprising that consumers are more anxious about achieving their retirement goals than they were pre-COVID. Nearly two-thirds state that they feel at least some concern over how they’ll maintain their lifestyle in retirement according to a 2020 Equitable Consumer Pulse Survey.

If you’re looking forward to retiring at some point in your life, the best thing that you can do to help alleviate that anxiety is to budget for retirement. Creating a budget in advance of retirement gives you a general idea of what your expenses and income might be in retirement — and help you see if you’re on the right track to save the money you need. Not sure how to get started? Below are some ideas.

Envision your future

You may not know ahead of time exactly how you’d like your retirement to look, but now is a great time to think about the options you have. Most people would like at least to maintain their current lifestyle. What does that look like for you? If you have a spouse or partner, talk about the things you’d like to do in retirement, how you’d like to spend your time and your priorities. Then, consider what it might cost to achieve those goals.

Gather your records

You already have some information you’ll need to put together a retirement budget: your current bills and invoices, pay stubs, and tax returns. Look at where you spend your money now, because not everything needs to change once you retire. From those records, you can start estimating your income and expenses in retirement.

List mandatory expenses

Start by putting together a list of your potential retirement expenses. These are your fixed monthly, quarterly, or annual expenses that you’ll continue to pay once you retire. They could include your mortgage or rent, various types of insurance, and utilities.

Consider how you’ll live and how much that will cost

How you plan to live will affect how much you’ll need to spend. If you want a new car every three years, you’ll need to include that in your expenses. If you know you want to eat out a couple times a week, include that as well. Take some time to think about the way you live from day-to-day and estimate those essential, but variable, expenses and include an increase for inflation. You should consider including things such as car payments, health care, long-term care insurance, pet costs, and groceries.

Include expenses for fun

List discretionary expenses such as entertainment, travel, gifts, classes, social events, etc. If your priority will be to see family as much as possible, and your children and grandchildren live across the country, you’ll need to budget for airfare. If your priority is to stay active by playing tennis or golf, you may want to budget for your club dues, lessons, and clinics. Consider the ways you’ll spend your time and then how much those activities will cost on an ongoing basis.

Put together an emergency fund

No matter what stage of life you’re in, it’s always smart to have an emergency fund to pay for those unexpected expenses that can come up — like replacing an old roof or paying for surgery on a knee that’s been bothering you. An emergency fund can also come in handy if you lose your job or are between jobs temporarily while you’re still working. Experts often say you should have enough money to cover between 3 to 6 months’ worth of expenses set aside. So, if you typically spend $3,000 a month, you’d want between $9,000 and $18,000 in an emergency fund.

Estimate your retirement income

For estimating purposes, you can use 3%-4% of your retirement plan or IRA balance for your annual income estimate. In addition, you can estimate your Social Security benefits income by visiting https://clicktime.symantec.com/38ya24EPyinHLasDVWUSzcy6xn?u=www.ssa.gov. Contact your life insurance agent for an estimate of how much cash value you might have in permanent life insurance policies at retirement and be sure to include any pensions you expect to receive. Add up your annual estimated income to see how much you might receive in retirement, noting whether it is pre- or post-tax income.

Anticipate your inheritance

Not everyone will get an inheritance. But, if you expect one and can estimate what it might be, you might be able to consider that as an asset available for retirement; however, it is not a sure thing  — unless your parents or grandparents are giving gifts of money while they’re alive. In 2022, individuals can gift up to $16,000 to each person they want, without paying gift taxes, up to a lifetime maximum of just over $12 million.

Compare your expenses with your income

Subtract your expected expenses from your income to see what your outcome might be. Will you have extra money left over – or  a shortfall that you’ll need to address? Having money left over isn’t a problem but a shortfall may be an issue over time, so you’ll want to consider your options. Do you work longer and retire later? Or are you able to save more between now and when you plan to retire?

Save more

If it doesn’t look like you’ll have enough money in retirement to sustain your standard of living and do the things you want to do, you might want to consider increasing your contributions to your retirement plan, or saving in an IRA, annuity or permanent life insurance policy. Consider how you’re saving money too — if everything was invested pretax in a 401(k), for example, you’ll end up paying taxes on all your retirement income. But, if you have a Roth IRA or use the cash value in a permanent life insurance policy to supplement your retirement income, you’ll be able to withdraw that money tax-free. It might be wise to have some income in retirement that’s taxed and some that isn’t.

Talk to a financial advisor

A financial advisor can help you with your budget, provide ideas about how to increase your investment growth over time, and may even make you feel more confident in your financial future. According to the Equitable survey, those who work with a financial advisor are significantly more likely to have $500,000 or more in assets than those who don’t, and are more likely to feel confident in the safety and security of their family, their ability to retire comfortably and maintain their current lifestyle after the COVID-19 crisis.


The AIA Trust is here to help

The AIA Trust offers retirement savings plans and distribution options through Equitable Financial Life Insurance Company (Equitable Financial) to assist you in achieving your retirement goals. Plans can be established for one-person firms (or components)—or for many employees—utilizing a variety of retirement savings and distribution vehicles. Equitable Financial can assist you toward achieving your goals based on over 50* years of experience working with association members and over 25 years with AIA architects.

Equitable Financial can help you review your options and offer you choices that can help alleviate the burden of establishing and managing a retirement savings plan. It’s one of the ways that the AIA Trust makes it easier for you to focus on doing what you do best: architecture.

For additional information on these AIA-endorsed member benefits, or to schedule a meeting with a financial professional please call Equitable Financial at 1-800-523-1125 or visit at mrp.equitable.com/ps/partners/partner-aia.cfm

This article has been written for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, tax, legal, or financial advice or services.

The Members Retirement Program is funded by a group variable annuity contract issued and distributed by Equitable Financial Life Insurance Company (Equitable Financial) NY, NY. Annuities have limitations and restrictions. For costs and complete details contact a Retirement Program Specialist. Equitable Financial and its affiliates do not provide tax or legal advice. You should consult with your attorney and/or tax advisor before purchasing a contract.

* This reference applies exclusively to Equitable Financial Life Insurance Company.

Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company(Equitable Financial) (NY, NY), Equitable Financial Life Insurance Company of America (Equitable America), an AZ stock company with main administrative headquarters in Jersey City, NJ, and Equitable Distributors, LLC.  Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI and TN).



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