Why Retirees Need a Budget

THE NEW WORLD OF RETIREMENT

- SANDRA BLOCK

As a longtime personal finance writer, I've lost track of the number of stories I've written about the importance of creating a budget. So now it's time for a confession: When I was working, I never really had one.

Instead, I took an approach that I suspect is pretty common. If I had money left at the end of the month—and was able to pay off my credit card balance—I figured I was doing okay. And like millions of working Americans, I had contributions to my 401(k) plan automatically deducted from my paycheck.

All of that changed when I retired. Without a regular paycheck, I can no longer use this back-of-the-napkin strategy to calculate how much I can afford to spend each month. Like a lot of retirees, I have a long list of things I'd like to do—from digitizing hundreds of family photos to touring Ireland—and most of them cost money, so having a plan is essential.

For many retirees, this transition is so discombobulating that they withdraw less from their savings than they can reasonably afford to spend based on the amount they've saved and their life expectancies.