By Bill Taber
The past few years have brought uncertainty and massive change, which means you might be more eager to retire than ever before. Despite these challenges, you have continued working diligently while saving for the future, just as you have always done. But the unfortunate truth is that almost 50% of Americans worry about running out of the money they have earmarked for retirement. Even if this is not currently a concern for you, it is essential to be financially responsible during retirement to avoid future problems.
Maintaining a budget is crucial for preserving financial stability during retirement. In fact, it serves as the cornerstone of personal financial management. In this article, we’ll share three budgeting tips that can help instill confidence and provide a sense of comfort as you navigate and enjoy your retirement.
1. Identify Flexible Spending Categories
As you build your budget, organize it based on needs. Every single expense should be identified as either fixed or variable and essential or non-essential. For example, your housing expenses are likely fixed and essential. Food is essential, but it is a variable expense. A gym or country club membership may be fixed, but it is non-essential. Other forms of leisure or travel are likely variable and non-essential.
Knowing which expenses are necessary and which are flexible can relieve some of your concerns going into retirement. If you’re used to spending $8,000 a month, once you sort your expenses and discover that only $6,500 of them are truly necessary, it can relieve a lot of pressure.
Identifying these spending categories also allows you to make wiser financial decisions and adjust better to market conditions. If we enter a recession and your portfolio is down, you can cut spending back to cover the necessary expenses you identified. Maybe you put off that big trip or dine out less frequently. This can potentially help you keep more of your money invested so you can be better positioned when the market bounces back.
2. Plan for Taxes
Unless all your money is in an after-tax account or Roth IRA, you’ll have to deal with taxes in retirement. Having your mortgage paid off before retirement is a common—and excellent—goal. However, don’t make the false assumption that no mortgage equals no payments.
Part of your monthly mortgage payment may be going toward property taxes and homeowners insurance if you escrow. Don’t forget that you still have to pay these bills when your home is fully paid off, and these figures must be included in your budget (and remember that these numbers will be inflating over time as well). One way to handle property taxes and homeowners insurance in retirement is to set aside money every month, just like you did with your mortgage. This way, you will have the funds available when those bills are due.
Property taxes won’t be the only taxes you’ll owe in retirement. Distributions from 401(k)s and IRA accounts may be considered taxable income. Even your Social Security benefits may be taxable, depending on your overall income. It’s critical that you withhold and pay the proper taxes so you don’t get into a large tax bill situation. A competent tax preparer can help you consider whether you need to file quarterly tax estimates.
3. Find a Trusted Partner
While collaborating with a tax preparer during your retirement years is a wise idea, it may not be sufficient enough to map out your entire financial picture. By adding a trusted financial advisor (ideally a fiduciary) to your support team, you can pursue a stress-free retirement, as opposed to one filled with worry and apprehension (as experienced by almost half of Americans).
At TABER Asset Management, our team works to create a holistic financial plan that encompasses your immediate and long-term aspirations, an attainable budget, and a road map to help you navigate your retirement. We prioritize your goals and aspirations over your investments and wealth, and we’re dedicated to enhancing your financial well-being and guiding you on the path toward financial freedom. Get started today by scheduling a 15-minute intro phone call online or reaching out to us at 515-557-1860 or invest@taberasset.com.
About Bill
Bill Taber is President and Founder of TABER Asset Management, an independent, fiduciary wealth management firm that strives to do one thing well: manage their clients’ money by creating wealth, building wealth, growing income, and preserving capital so they can experience financial freedom. With more than four decades of experience, Bill is dedicated to building relationships with his clients and their families and walking alongside them as they navigate financial decisions. His favorite days are the ones when he gets to witness the joy and relief on his clients’ faces when they realize they can pursue their dreams and live their ideal lifestyles. Bill is known for going the extra mile, getting things done with integrity, and working with a stewardship mentality.
Bill graduated from the University of Iowa with a bachelor’s degree in business administration and fell in love with the profession when he got to help one of his first clients—his father—turn his lifetime of hard work into a dream retirement. He got his start in the industry as a corporate services representative for Bankers Trust Company and spent decades working as Assistant Vice President of E.F. Hutton & Co. and First Vice President of Principal Financial Securities. He is also a graduate of the E-Myth Worldwide Mastery Business Development Program and is Series 65 registered.
In his spare time, Bill enjoys giving back to his community and served 11 years as a member of the Board of Trustees of Broadlawns Medical Center and 14 years as a Community Representative to their Board Finance Committee. He is also one of the founding members of the Greater Des Moines Connections Mentoring Program. When he’s not working, you can often find Bill spending time with his family and participating in one of his many hobbies, which include traveling to national parks, presidential libraries, and foreign countries; gardening; reading non-fiction; and practicing yoga, Pilates, and meditation. He also loves the simple joys of listening to music, going for walks or bike rides, and watching James Bond 007 films and any movie starring his favorite actress, Meryl Streep. To learn more about Bill, connect with him on LinkedIn.