How to Create a Budget When You're Retired

Retirement changes the fundamental structure of your finances. During your working years, budgeting was about making sure spending stayed below a paycheck that arrived regularly and typically grew over time. In retirement, income is often fixed — coming from Social Security, a pension, and withdrawals from savings — while expenses, especially healthcare, can grow faster than inflation.

Building a retirement budget starts with understanding your income. List every source: monthly Social Security benefit, any pension payments, required minimum distributions from retirement accounts (which begin at age 73 under current rules), any part-time work income, or rental income. This is your fixed monthly base.

Next, list your expenses across the main categories. Housing covers your mortgage or rent, property taxes, homeowners or renters insurance, and regular maintenance. Healthcare deserves special attention — Medicare premiums (Part B is deducted from Social Security), supplemental or Medigap insurance, prescription drug costs, and out-of-pocket copays and deductibles. Estimates suggest healthcare costs grow at roughly twice the general inflation rate, so build in room for increases. Food, transportation (gas, insurance, vehicle maintenance), utilities, and personal spending round out the core categories.

The 4% rule is a commonly referenced starting framework: if you withdraw approximately 4% of your retirement savings in year one and adjust for inflation each year after, your savings have a reasonable probability of lasting 30 years. This is a guideline, not a guarantee — adjust based on your specific situation and speak with a financial planner for personalized guidance.

Free tools to help: the AARP Retirement Calculator at aarp.org helps estimate how long your savings will last. The Social Security Administration's Benefits Calculator at ssa.gov lets you check exactly what your benefit will be at different claiming ages.

For tracking and planning software, several good options exist. Simplifi by Quicken costs about $4 per month and provides clear spending tracking by category. Monarch Money at $10 per month has excellent visual dashboards and is well-designed for retirees who want to see the big picture. Empower (formerly Personal Capital) is free and particularly useful for tracking investment accounts and net worth alongside spending. YNAB (You Need A Budget) costs around $14 per month and is excellent for people who want to assign every dollar a specific purpose.

If you prefer spreadsheets, search "retirement budget template" in Google Sheets to find free, pre-built templates you can customize. These require no monthly fee and work offline.

Build a budget that includes occasional large but predictable expenses: car replacement every 8–12 years, home repairs (a roof, an appliance, exterior paint), and vacations or family events. Setting aside a small monthly amount for these in a separate savings account prevents them from disrupting your regular budget when they arise.