Budgeting in retirement

You don't need a fortune to live well in retirement. In fact, most Australians don't have a fortune to retire on, and today over 3 in 5 people aged 65-plus are on an age pension . What matters is how you use your money, and that's where budgeting plays a vital role.
By · 7 Feb 2022
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7 Feb 2022 · 5 min read
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Part of enjoying retirement is not having to worry about money. Running out of funds is a common concern among retirees, and living within a budget can help you extend your financial resources like super and other investments over what will hopefully be many years.

A handy benchmark to get started with a budget is the retirement living standard put together by the Association of Super Funds of Australia. It’s updated several times a year, and it puts a dollar value on the main living costs retirees face. Use it as a guide to develop a budget of your own, and finetune the numbers to reflect your lifestyle. You may want to allow a bit extra for travel, dining out or hobbies like golf. Or maybe you’re likely to spend less on things like clothing or health care.

Budgeting in retirement isn’t just about managing day to day living expenses. You also need to plan ahead to manage major costs like upgrading your car. Some creative thinking here can help. You may find you can extend out the time until you need to replace a car. Maybe you’re happy to buy a used rather than new vehicle. Or, after crunching some numbers, you could find that you can get by using Uber, taxi or a car sharing service like GoGet – and still be in front financially compared to running a car of your own.

What matters is that you give some thought to how you will handle any big expenses that lie over the horizon. Simply hoping it will all work out can be a recipe for disaster.

What’s interesting about retirement is that our spending doesn’t tend to be the same year after year. In my experience, spending tends to be higher in the early years of retirement when people are more likely to head off on a major trip, splash out on a new caravan or boat, or just celebrate their new-found freedom with more dining out.

After a few years, spending tends to settle into a more predictable pattern, often with fewer major outgoings. Being aware of this possible change in spending patterns can help you draw up a realistic budget.   

After you’ve worked out a retirement budget, it can be a good idea to test drive the numbers, while you’re still working. This can show whether your budget – or your retirement lifestyle – needs to be finetuned.


If you're retired or approaching retirement you may be interested in Paul Clitheroe's Planning for Volatility When You're Retired


Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.

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