How to Make a Retirement Budget

Creating a retirement budget can appear to be a daunting task. But anticipating major expenses including housing, health care, food and transportation along with being able to estimate your retirement savings and life expectancy can go a long way in creating a budget you can comfortably retire on.

Terry Turner, writer and researcher for RetireGuide
  • Written by
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner has more than 30 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).

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  • Edited By
    Lee Williams
    Lee Williams, senior editor for

    Lee Williams

    Senior Financial Editor

    Lee Williams is a professional writer, editor and content strategist with 10 years of professional experience working for global and nationally recognized brands. He has contributed to Forbes, The Huffington Post, SUCCESS Magazine,, Electric Literature and The Wall Street Journal. His career also includes ghostwriting for Fortune 500 CEOs and published authors.

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    Ebony J. Howard, CPA
    Ebony J. Howard, CPA

    Ebony J. Howard, CPA

    Credentialed Tax Expert at Intuit

    Ebony J. Howard is a certified public accountant and freelance consultant with a background in accounting, personal finance, and income tax planning and preparation.  She specializes in analyzing financial information in the health care, banking and real estate sectors.

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  • Published: October 12, 2020
  • Updated: August 17, 2022
  • 6 min read time
  • This page features 9 Cited Research Articles
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A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics.

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APA Turner, T. (2022, August 17). How to Make a Retirement Budget. Retrieved September 25, 2022, from

MLA Turner, Terry. "How to Make a Retirement Budget.", 17 Aug 2022,

Chicago Turner, Terry. "How to Make a Retirement Budget." Last modified August 17, 2022.

How to Create Your Retirement Budget

Creating your retirement budget means taking a careful look at the savings you expect to have available at retirement, any retirement income you can count on, your expenses during retirement and how long you expect to live after you retire.

You should not wait until retirement to plan your budget, but start while you are still saving for your golden years. This way, you’ll have a better idea of when retirement is right for you.

A retirement budget can also help you take into account any plans you have for retirement such as travel or a new pastime. And it can help you understand how long you have to work and save to make those retirement plans happen.

Questions to Consider in Planning a Retirement Budget
  • At what age do you plan to retire?
  • When is your spouse planning to retire?
  • How much longer do you expect to live after retirement?
  • Can you take part in your employer’s retirement plan — 401(k), pension plan or other retirement savings plan?
  • Do you plan to travel or take up a new, possibly costly hobby?
  • Will you continue to work part-time during retirement?
  • Will your health insurance change when you retire or will you keep your current insurance?

Once you’ve answered these basic questions, you can start calculating your retirement savings, estimated expenses and other factors that will affect your retirement income and spending.

You should take concrete steps to include as much information as you can about your resources and expectations.

The 5 Steps to Creating Your Retirement Budget
  • Gather and review your financial records, including information from all your retirement savings accounts.
  • Estimate your annual or monthly retirement income from all sources.
  • Make a list of all your recurring expenses and potential one-time expenses you expect during retirement.
  • Compare your estimated expenses to your estimated income.

After you have these numbers down on paper — or on a spreadsheet on your computer — be sure to check back periodically to see if you are on target or need to make adjustments to your budget or retirement plans.

Start Your Retirement Budget with a Savings Plan

Generally, you should start saving at least 10 years before you plan to retire, but the earlier you start your retirement savings, the more money you’ll have to work with in your budget.

The three most common ways to save for retirement include retirement plans offered by your employer, savings and investments (including individual retirement accounts or IRAs) and Social Security. Taking advantage of any or all three can help you build retirement savings.

Saving just $6,000 a year — with seven percent annual growth — can leave you with retirement savings of more than $800,000 over a 35 year career.

Retirement savings potential graph
Based on $6,000 per year over 35 years at 7% growth

Expenses to Expect in Retirement

You can typically expect your retirement expenses to be only about 70 to 80 percent of what you were spending before you retire. Some expenses related to work, such as clothing and transportation, should decrease. But you should also plan for health care expenses to increase as you age.

When estimating expenses for your retirement budget, you should take into account three main types of spending over the rest of your lifetime: essential, discretionary and one-time expenses.

Expenses to Expect in Retirement
Essential spending
These expenses include things that you need to get by such as clothing, food, health care, housing, transportation and utilities.
Discretionary spending
These include non-essential items that usually come with monthly bills such as cell phone plans, cable television, streaming services, internet, gym memberships and other memberships or subscriptions. They may also include travel, entertainment and dining out.
One-time spending
Expect one-time expenses such as emergencies, family events such as a wedding or funeral and home or auto repairs. A good rule of thumb for housing maintenance is to budget one percent of your home’s value toward repairs and maintenance every year.
Required expenses
This includes income as well as local, state and federal taxes, car registration fees, insurance premiums and other expenses that may come as a monthly or yearly bill.

All of these are generally expenses that you’re already paying. But you may not realize how much they can add up to because you spread out the cost.

As you age, and after you retire, some of these expenses naturally decrease. The U.S. Bureau of Labor Statistics estimates the average costs of major expenses to expect based on your age.

Average Annual Expenses for Retirees
ExpenseAge 55 - 64Age 65 - 74Age 75 and Older
Health care$4,958$5,956$5,708
Pensions & Social Security$6,578$2,788$800
Other expenses$5,963$5,257$5,041
Total expenses$56,267$48,885$36,673

Calculating Life Expectancy for Your Retirement Budget

Annual expenses and income are fairly easy to estimate. But your life expectancy — how long you’re likely to live — is harder to predict. And your life expectancy will ultimately determine how you can best stretch your savings into a steady income over the course of your lifetime.

However, there are tables, data and other tools that can give you a good estimate of your life expectancy.

U.S. Life Expectancy in 2017 – Years Remaining at Specific Ages

You may notice the remaining years in this table don’t decline steadily. That’s because the longer you live, the longer your life expectancy grows — at least from a statistical point of view.

Once you retire, you should adjust your retirement budget every few years to reflect your changing life expectancy.

Life Expectancy Calculator Mockup Calculate Your Life Expectancy
Life expectancy is a key factor in determining how much money you will need in retirement. Use our calculator to estimate how long you will live.

Tips to Make the Most of Your Retirement Budget

Putting together a retirement budget may seem like a daunting task, but there are several steps you can take to create your budget quickly and effectively.

Top 7 Tips to Plan Your Retirement Budget
  1. Use retirement calculators like those offered by the Social Security Administration or your retirement savings plan to determine when you can afford to retire and how much retirement income you can expect.
  2. Set a retirement savings goal and start saving toward it.
  3. Contribute to your employer’s 401(k) or other retirement savings plan.
  4. Contribute to an individual retirement account (IRA).
  5. Learn basic investment principles for your retirement savings, such as the role stocks and bonds play in your savings and how diversifying investments protects your investments.
  6. Don’t touch your retirement savings until you retire.
  7. Keep up to date with your Social Security benefits and your 401(k), IRA or other retirement accounts.

Talking to a licensed financial advisor can also help you understand what you need to do to create a retirement budget that works best for you.

Last Modified: August 17, 2022

9 Cited Research Articles

  1. (2020, September 23). Retirement. Retrieved from
  2. Sightings, T. (2020, March 19). How to Create a Retirement Budget. Retrieved from
  3. Brandon, E. (2020, February 24). 10 Costs to Include in Your Retirement Budget. Retrieved from
  4. Teachers Insurance and Annuity Association (TIAA). (2020, May). Retirement Budget Worksheet. Retrieved from
  5. New York State Office for the Aging. (2020, January). Self-Help Guide to Pre-Retirement Planning; Chapter 6, Budgeting and Financial Planning. Retrieved from
  6. Employee Benefits Security Administration. (2019, September). Top 10 Ways to Prepare for Retirement. Retrieved from
  7. U.S. Social Security Administration. (2017). Actuarial Life Table. Retrieved from
  8. Foster, A.C. (2016, September 16). A Closer Look at Spending Patterns of Older Americans. Retrieved from
  9. U.S. Social Security Administration. (n.d.). Benefit Calculators. Retrieved from