How can you set yourself up so that you do not have to worry about money issues during retirement? The act of retiring has the feeling of being an irrevocable decision in an uncertain world. The stakes seem enormous. If you have a choice of when to retire, you do not want to make a serious mistake by retiring too early. And you may not want to work longer than you have to. You want to get your timing just right.
Before retirement your financial focus may have been on getting by and also accumulating money that you could live off during retirement. Your real choices were about how much money to spend or save and how to invest it in investments for growth. Most likely, your income from your salary has been fixed. It has been neither simple nor easy to make substantial changes to that income and cash flow.
But during retirement it is the other way around. Your investments are relatively fixed and you choose how much income to take from them. Your investments, after all, are nothing more than future income. Do you want your income now or later?
When you take income from investments and other sources, you need to match your income against your expenses. This is budgeting. Actually, the questions – Do you or will you have enough to retire? – is shorthand for – Can you match up your projected income and expenses to have the lifestyle you want? A retirement budget is necessary to show that the match will work throughout your lifetime.
The creative part of budgeting is to think through your alternative lifestyles and make the tradeoffs you need to make. Think of your budget as a guideline that provides you with some flexibility. Yes, you can spend somewhat more now with the idea that you may be spending less later, especially if you reach an age or circumstance when you do not get out as much.
What if there is a gap between where you will be and where you want to be? There are two basic approaches you can use to address the issue of having enough. One is to increase your income. The other is to pare back budgeted expenses to match your future income. Can you cut back without seriously affecting your lifestyle? Creativity will help your thinking.