You Spend Too Much
We all do, before, and probably during, retirement. Employee Benefit Research Institute studies found that 46% of retired households spent more annually in the first two years of retirement than they did just before retiring.
“Ideally you’ve already started preparing a budget prior to entering retirement, but it’s critical to help you understand how to live within your means and not run out of money,” says Schwab-Pomerantz, who offers this simple retirement-budgeting strategy:
Step 1. Add up your monthly expenses – factor in taxes and extras such as long-term health care.
Step 2. Separate these expenses into two groups – nondiscretionary (the must haves) and discretionary (the extras).
Step 3. Tally up all sources of income other than your portfolio, such as Social Security, pensions, salary or real estate.
Step 4. Subtract your expenses from your income to see what your budget should be.