Two financial reports are a must throughout life, but are critical at and during retirement. They are the Net Worth and Income Statements which give you information about your financial health. As we age, our health changes and so does our financial health. We take the necessary steps to keep us physically sound, so must we take proactive steps to secure a sound retirement.

A tried and true method is called a budget, and the word ‘budget’ strikes fear in the hearts of many.

But think of it as a tool to keep you on the straight and narrow to achieving your goals. Remember that a budget is not written in stone. Income and expenses are never static. A budget is a flexible tool that changes as income and expenditures change. The most important advantage to budgeting is gaining control of your financial health especially at or during retirement where there are unique challenges.


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  • create a pre-retirement net worth statement
  • create a pre-retirement income statement
  • create a retirement income budget
  • plan and create a retirement expense budget
  • include taxes in your expense budget

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  • believe you are in a lower tax bracket at retirement
  • stop saving
  • stop working, if you can
  • think you have to figure this out alone
  • deprive yourself


Do create a pre-retirement net worth statement

This statement shows you what you are worth. Make two columns.

The first column contains your assets (items that you own). For example, cash/checking in bank, investments (stocks, bonds, CDs), cash value of life insurance, annuities, real estate, business interests, automobiles, furniture & fixtures, collectables, and other assets.

The second column contains your liabilities (what you owe). For example, mortgages, loans, credit cards, and taxes.

Add each of these columns. Then subtract the liabilities from your assets. The result is your Net Worth.

This is a great exercise to do at tax time because you are in a financial mindset and are receiving the necessary documents. Do this at the end of every year and track your progress from year to year.

Do create a pre-retirement income statement

This statement contains income and expenses during a year. The income of the pre-retirement statement will most likely contain income from W-2 income (jobs), 1099s (non-employee compensation), and some investment income (dividends, interest, and capital gains). The expenses reflect pre-retirement lifestyle which will be different from retirement.

This statement is the basis for retirement budgeting.

Do create a retirement income budget

We start with the pre-retirement Income Statement. Retirement income is usually from fixed income and investment sources such as pensions, social security, annuities, 457s, 403(b)s, 401(k)s, IRAs, interest and dividends.

This is your retirement income. How has the character of income changed? Has it increased or decreased? Is it going to change over time? It could be more or less than pre-retirement income.

Do plan and create a retirement expense budget

Many financial decisions need to be made to be able to live on retirement income.

Some of these questions help in making those life-changing long term financial decisions:

1) Are you staying in your present home? If so, can you maintain (physically and financially) the home yourself at present? In five years? In ten years?
2) Is moving an option? Where? Warmer climate? Close to children? Condo or Active 55+ community?
3) Will you still work? Full time? Part time? Volunteer?

All these can have a major impact on retirement expenses. It’s all in the planning process, preferably before retirement. Have an idea of your goals, make modifications, implement, and revise your budget as often as possible to keep spending within your retirement income.

Do include taxes in your expense budget

Be aware of the Required Minimum Distribution rules (RMD) at the age of 70 ½. The investments that have been tax deferred all those years are becoming taxable upon mandatory distributions at age 70 ½.

Did you plan for this expense? It could be a sizable portion of your expense budget. Stagger distributions prior to 70 ½ to minimize impact of RMD.


Do not believe you are in a lower tax bracket at retirement

Previous generations thought that when they retired they would be in a lower tax bracket. This is a myth for many of today’s retirees, as tax deferred investment becomes taxable upon distribution. This is critical at age 70 ½ where distributions are mandatory according to actuarial tables.

Your first option is to take staggered distributions after 59 ½ (to avoid 10% early withdrawal penalty), and pay taxes. You know what your tax bracket is at distribution. You do not know your tax bracket at 70 ½.

Consider investing in tax free vehicles like ROTH IRAs or whole life insurance. This is a good option while still working in order to pay the taxes. This strategy gives you more control over the amount of distributions as well as taxes payable.

Your second options is to pay tax on mandatory distributions (RMD) at 70 ½ according to actuarial tables. These taxes become payable during retirement when most of the income is fixed. Hint: take taxes out of distributions to minimize a large lump sum tax bill when filing taxes.

Do not stop saving

Saving is still necessary during retirement. It should be a budgeted item no matter how small an amount. These savings could be used for vacations, entertainment, gifts for grandkids,taxes, or building up (or replenishing) an emergency fund.

Do not stop working, if you can

Working in retirement has numerous benefits—physically, mentally, and socially. Another benefit of working in retirement is financial as it allows you to defer withdrawals from savings.

Working also stimulates the brain, keeps you learning, and keeps those cells active. There are other numerous ways to exercise those brain cells beyond working, though. You could go back to school to finish that degree program. (Ok, maybe too much studying?)

Try taking those courses that are of interest to you. Many colleges offer discounted or free courses for seniors. There are continuing educations courses that are short-term from a few hours to a few days. Learn a new hobby. Make retirement a self-realization project.

Do not think you have to figure this out alone

There are many financial experts who are available to help you get organized with a good retirement budget. Whether it’s a personal accountant or a financial educator, you can go to someone for help to get organized and situated, so you can take it from there, or have someone oversee your finances into and throughout your retirement.

Do not deprive yourself

You have set physical, educational, and financial goals. These goals may seem daunting. Break them down to smaller more manageable subsets of major goals. As you complete each subset, reward yourself. These rewards do not have to be big or expensive, only special and memorable. Have lunch with friends, invite friends for tea, take a long leisurely bath, go see a movie, go for a walk in the park, or do nothing. This can revive your spirits to conquer the next step towards your goal.


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We have created the basic tool—the budget—to provide you with a guide to your financial health. Life spans have increased; therefore, retirement funds need to last longer. A budget is not written in stone and needs to be adjusted many times during retirement. One thing we can count on is that life is always in flux. The budget is a great way to gain control of your financial life. Seemingly small adjustments to expenses can have huge, long term impacts.