How to Prepare for Retirement on a Budget: A Simple Plan for Spending With Confidence

Will my money last?

That’s the question I get asked all the time, even from people who’ve saved well and worked hard their whole lives. You’d think a healthy nest egg would settle the nerves. Often it doesn’t. Without a plan, even a big number can feel like a guess.

Retiring on a budget isn’t about sacrificing all the things you want to do. It’s more about planning ahead and being intentional. The healthy balance is easier to strike than most people realize.

Start with the money coming in

Before you plan what goes out, you need a clear picture of what comes in. For most retirees, that income shows up from a few places:

• Social Security
• A pension, if you have one
• Your portfolio — your retirement accounts and your Freedom Accounts (that’s our name for your taxable and joint brokerage accounts)
• Annuities
• Other sources, like rental income or a little part-time work you actually enjoy

Add those up, then subtract the taxes you’ll owe to come up with your net number. What’s left is the honest number you have to work with each month.

Now figure out what you’ll actually spend

This is the part many people rush or estimate, but precision can make all the difference.

A simple way to start is to split your spending into two buckets. The must-haves — housing, food, insurance, healthcare, taxes. And the nice-to-haves — travel, hobbies, golf, spoiling the grandkids. Knowing the specific numbers builds more flexibility and precision into the plan.

A couple of things that trip people up:

• Inflation raises your costs every year. A budget that works today needs room to breathe a decade from now. If your overall cost of living rises by 2.5% / year, that may seem trivial, but it adds up. For example, if you need $100,000 of spending in a year today, you might need about $128,000 per year 10 years from now.
• Healthcare needs tends to climb as you age. It’s worth planning for, not hoping around.
• The 75% Rule of thumb. You may have heard a rule of thumb that you’ll spend a certain percentage of what you used to spend while you were still working. Each person’s % is a little different though, so this is simply an estimate and might not be your reality.
• Spending can jump up and down throughout retirement. It often runs higher in the early ‘go-go’ years of travel and fun, eases off in the middle, then ticks back up later as healthcare needs grow. We call that pattern the Retirement Spending Smile.

Mind the gap

Now do the simple math. Take your current spending plan and subtract the income you can count on from Social Security, pension, and other sources of income. Whatever’s left is the gap your savings need to fill each year.

If the spending number is uncertain, or is going to fluctuate year-to-year, that might still be ok. We use a flexible spending approach we call the Guardrails system. The idea is straightforward. You set sensible upper and lower limits on your spending. When markets are strong, you give yourself a little room. When they pull back, you ease off on the ‘Nice-to-have’ spending for a bit. It keeps you steady through the ups and downs instead of white-knuckling every headline.

How to prepare for retirement on a budget that actually lasts

Once you know your income, your expenses, and your gap, the last piece is where you pull money from — and in what order. The order matters more than most people realize, because it can change how much you pay in taxes over time.

Here’s how this generally works for many retirees:

1. Tap your Freedom Accounts (taxable/brokerage) first. These are usually the most tax-friendly to spend from early on.
2. Then your tax-deferred accounts, like a traditional IRA or 401(k). These haven’t been taxed yet — which is why a large tax-deferred balance can become a tax bomb down the road. One reason we like to fill the lower tax brackets early is to chip away at that exposure before it grows.
3. Save your Roth for last. Tax-free money is often most valuable kept growing as long as possible.

This is a general framework, not a personalized instruction — the right order for you depends on your full picture, and it’s worth walking through with your advisor. In any given year, it can even make sense to mix withdrawals from multiple types of accounts. Planning at that level can be complicated to do on your own though.

Keep in mind there are also required withdrawals from certain accounts once you reach a certain age. Once you reach age 73, the IRS generally requires you to start taking withdrawals — called required minimum distributions, or RMDs — from tax-deferred accounts like traditional IRAs and 401(k)s. That starting age is currently set to rise to 75 in 2033.

A quick word on Social Security timing

When to claim Social Security is one of the biggest budgeting decisions you’ll make. You can start as early as age 62, but your monthly benefit will be permanently reduced. Wait, and it grows — delayed retirement credits stop adding up at age 70, so there’s no benefit to waiting past then. For anyone born in 1960 or later, full retirement age is 67.

But waiting isn’t automatically the right move for everyone. A Vanguard study from February 2025 found that for retirees who spend conservatively — roughly under a 2% withdrawal rate — claiming early can actually come out ahead, with a break-even around age 88 and a potential wealth advantage in the range of about $60,000 to $107,000. The lesson isn’t always wait or always claim early. It’s that the answer depends on your plan — which is exactly why a budget matters.

What this looks like in real life

The people who don’t plan well enough leave themselves vulnerable to stress and overwhelm the first time a headwind comes their way.

The people who don’t trust their plan wind up missing out on many of it’s benefits

The ones that stick to a solid plan from the beginning almost always have more than enough because they seize the opportunities that were available and they avoided the potential costly mistakes.

Putting it together

Preparing for retirement on a budget comes down to four honest steps: know your income, know your real expenses, find the gap, and have a smart plan for filling it.

Once your plan is in place, then you just need to worry about how to live your life to the fullest. Only you can come up with that part of the plan.

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Jeremy Finger, Founder

Jeremy grew up in Nichols, South Carolina, where fishing with his dad sparked a lifelong interest in how money shapes our lives. Since becoming a financial advisor in 1996, he’s helped people navigate life’s biggest moments—and today, with Riverbend, he offers a calm, personal approach that helps clients focus on what matters.

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