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How to Build a Budget That Changes as You Do, From Pre-Retirement to Late Retirement

An older woman looks at paperwork and her laptop and tablet at the dining room table

Work can be rewarding and provide a sense of accomplishment. However, for most people, work is a step towards one day no longer having to work. Retirement is both a goal and a lifestyle. Whether your retired or looking towards retirement, what’s the best way to ensure your decades of work continues to pay off?

The solution is no different than your working years. You need to establish a retirement budget. The type of retirement your able to enjoy will depend on income stream and the decisions you make after you retire. Doing some financial planning now can help you protect your retirement savings and enjoy the lifestyle you want.

How Your Stage of Retirement Determines Your Retirement Budget

Retirement is more than just reaching retirement age. After the retirement party decorations are taken down, you may realize retirement consists of four distinct stages, each with its own unique priorities. Here’s how each stage of budget cycle breaks down and what you should do in each.

Pre-Retirement (age 50 to 62)

Pre-retirement is a good time to look ahead and estimate your monthly Social Security payment, including any pensions and annuities you have, since you’ll be able to qualify for Social Security payments by age 62. However, doing so might not always be the best ideas since your future monthly benefits will be permanently reduced.

In your 50s and 60s, you may still be paying for your kids’ college tuition, buying a new home, or even paying for a wedding. All these ongoing expenses can make it difficult to balance your current expenses with your plans for tomorrow. Because life can be unpredictable, this is also a good time to consider purchasing a long-term care insurance policy.

Early Period of Retirement (Ages 62 to 70)

During this phase of retirement, you’ll choose the exact age to retire, which will directly impact how much you’ll get each month. Before you decide, look at how much more you’ll make if you delay your retirement to 65, 66, or full retirement age, 67. Be sure to also look into the repercussions of early retirement on your IRAs, 401(k) accounts, or any pensions you’ll receive.

Once you’ve worked out your post-retirement income, use expense method retirement planning to develop a preliminary budget. You can then refine that budget in the coming months as you settle into your budget and get a feel for your retirement expenses. During this time, you’ll probably spend more traveling and exploring new hobbies. If you haven’t already, this is a good time to consider long-term care insurance to help cover unexpected health care expenses not covered by Medicare.

Even if you’re financially secure, it’s essential to remember that your retirement dollars could need to stretch for a long time. That’s why you may want to protect your retirement funds by balancing your more expensive activities with inexpensive or free ones.

Middle Retirement (Ages 70 to 80)

During middle retirement, you’ll likely be receiving Social Security benefits as there is no financial incentive to delay past age 70. Since you may want to travel less and stay home more, you could see your expenses go down.

You may have created a will and estate plan when your children were younger because you wanted to make sure that, if something happened to you, they’d be taken care of. However, you might also want to think about creating both a financial and healthcare power of attorney in case you become unable to manage your money or need someone to make your medical decisions. This is when a lot of older adults start to think about moving to an independent living community that offers higher levels of care right on campus.

Late Retirement (80 and up)

As you become less active in your 80s, you will likely see a reduction in your lifestyle spending. However, health care costs will probably become a higher percentage of your expenses because this is when medical spending tends to be the highest. Medicare will cover many of your costs, but you’ll still have out-of-pocket costs for things, like co-payments and deductibles.

Budgeting for Healthcare

The annual Fidelity Investments Retiree Health Care Cost Estimate report found a 65-year-old couple who retired in 2022 would be expected to spend $315,000 (after taxes) on medical expenses and healthcare during the rest of their lifetime. This estimate doesn’t even account for the cost of long-term care.

Benefits of Choosing a Life Plan Community with Life Care

Freedom Point at The Villages is a Life Plan Community offering a wide variety of services and amenities. Plus, our Life Care contract gives you the peace of mind of knowing you have access to a full continuum of high-quality care — including assisted living, memory care, skilled nursing and rehabilitation — is available right here at predictable monthly rates.

Freedom Pointe at The Villages Pricing Explained

Choosing a community like Freedom Pointe makes your retirement planning easy. For help in understanding these fees, here’s what each one includes:

  • Flex Your Future: This program lets you embrace the freedom of independent living by customizing your senior living costs to suit your finances. You can tailor your entrance fee by selecting your residence now with less out of pocket, then pay the remainder of your entrance fee on a flexible timeline.
  • Entrance fee: The amount of this fee is based on the type of senior living contract and the size of residence you choose. The more square footage, the higher our entrance fee. Your entrance fee not only covers your residence but gives you guaranteed access to any future care you may need at below-market rates.
  • Monthly fee: Your monthly fee covers home maintenance and property taxes, utilities, your dining plan, fitness membership, a beautifully maintained campus and dozens of other services and amenities.
  • Life Care: Our Life Care contract offers a way to pay for long-term care expenses that makes them more predictable — saving you tens of thousands of dollars over other long-term care options.
  • Tax advantages: The IRS has ruled that portions of both your entrance fee and monthly fee are deductible on your federal income return as prepayment of medical expenses. To learn more, consult your tax advisor.

Freedom Pointe is the Only Retirement Plan You Need

Your benefits and savings will have to cover your expenses for three decades or more. To learn how Flex Your Future and our pricing contracts can help make it easier to plan for all retirement stages, use our Community Assistant chat function or give us a call.