I Retired in My 80s: Here’s My Monthly Budget

With surging inflation and housing costs over the last few years, some older Americans have delayed retiring, and many continue working into their 70s or 80s. But how does such a late retirement impact your budget ?

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If you’re considering retirement in your 80s , keep the following tips in mind.

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Budget Breakdown

“One of my clients, Joan, retired at 82 years,” said Oliver Smith, financial advisor and founder of VAT Calculators . “Her monthly budget is utilitarian to ensure that it maintains her quality of life while effectively managing her resources.”

The outline of her monthly budget looks like this:

• Housing and utilities: $1,500. Joan downsized to a smaller home for reduced expense and maintenance.
• Healthcare: $600. Supplemental insurance and out-of-pocket expenses. “Since the need for medical intervention rises fast at this stage of life, make sure you can keep pace with your healthcare needs,” Smith advised.
• Groceries and dining: $400. Cooking at home and eating out only occasionally.
• Transportation: $200. Minimal use of a paid-off car, and public transportation discounts for seniors.
• Leisure and entertainment: $300. Keeping active through social activities, hobbies, and memberships.
• Miscellaneous: $200. Gifts and unexpected expenses.

The Risk of Rising Healthcare Costs

“Healthcare plays a major role in Joan’s budget because health risks and costs rise as you age,” continues Smith.

Indeed, one of the risks of planning to work later into your senior years is that poor health could knock you out of the workforce. If you fail to save enough for retirement an plan to work indefinitely, a health crisis could take that option off the table.

While you can count on Medicare starting at age 65, it still comes with costs. Charlie Pastor, CFP and contributing expert at The Motley Fool Ascent, sees it among his octogenarian clients. “When considering expenses, do not overlook Medicare costs. Premiums for parts B and D, plus those for a supplemental or advantage plan, can add up,” he said.

“Be sure to shop around for prescription coverage each October, as out-of-pocket costs can vary from year to year,” he added. “Understanding your benefits and making changes when necessary can save you a lot of money throughout the year. I’ve seen retirees save hundreds of dollars just by going to a different pharmacy across the street to get their medications.”

Combining Income Streams

People who work into their 80s enjoy multiple income streams. First, they still bring in active income.

Second, it also means that they delayed receiving Social Security payments until they qualified for the maximum benefit at age 70. “It typically makes sense for those over the age of 70 to turn on Social Security benefits, so later retirees may already be familiar with their monthly benefit before they stop working,” explained Pastor.

He continued, “However, the way in which you collect pension benefits, if any, should be carefully considered. Older retirees and those with health concerns may consider period-certain or joint survivor benefits to get the most out of their pension in case of a premature death. These types of conversations aren’t fun to have, but can be vitally important to maximizing a family’s assets.”

Older retirees may have also been able to leave their retirement investments untouched and continuing to compound, long after their peers began using theirs.

That said, older adults don’t always have a choice about when to start drawing from their nest egg.

Required Minimum Distributions

The SECURE Act 2.0 raised the age of required minimum distributions (RMDs) to 73 in 2023, and it’s scheduled to rise to 75 in 2033.

Where it gets tricky for older workers is the different rules for different retirement accounts. You don’t have to start taking RMDs from a 401(k) account with your current employer, regardless of your age. If you have a 401(k) with a previous employer, you can roll it into your current employer’s plan.

However, you must still start taking RMDs from other retirement accounts including IRAs, SIMPLE IRAs, and SEP IRAs., although you don’t have to take them from Roth accounts.

These distributions add another source of income but also require you to start draining your retirement accounts on the government’s schedule, not necessarily your own.

Final Thoughts

“It’s a delicate balance to strike between maintaining your lifestyle and preparing for the soaring cost of health care,” says Smith.

But if you worry about tight finances, working until late in life helps you build a bigger nest egg and delay accessing it. And you can always trim your budget. “Strategic downsizing coupled with spending only on necessities can keep even lean retirees comfortable and financially stable through their retirement years.”

This article originally appeared on GOBankingRates.com : I Retired in My 80s: Here’s My Monthly Budget