Creating, and sticking to, a well-planned budget can help you ease potential stress over financial concerns. 

Soon-to-be retirees often wonder how much they need to save if they want to live comfortably in retirement. There’s no single answer to this question, yet most retirees will find that careful planning will let them live on a modest monthly income.

Benefits and Savings 

While financial experts often recommend a savings plan which will allow retirees to live on 60 to 80 percent of their pre-retirement income, many retirees find themselves relying on a combination of Social Security benefits and income from savings which may be much lower than that amount.

In 2010, the Federal Reserve estimated that a household headed by someone aged 65 to 74 earned an average of $42,700, while households over age 75 had an average yearly income of just $29,100. These numbers include both retirees and people who are working full or part-time jobs, yet it gives an idea of an average income for adults at retirement age.

A look at Social Security benefits can also suggest average retirement income. According to the Social Security Administration, retired workers currently receive an average of $1,237 in monthly benefits, while their spouses (if they are married) bring in an additional $613. A modest pension or other savings plan may bring that up to an income of around $2,800 per month ($33,600 per year), which is right in the ballpark of the Federal Reserve’s reported incomes.

Fixed Income Budget 

Living on a fixed income is easier when you stick to a well-planned budget. This means adding up your total income and dividing it up among several important expenses, such as housing, utilities and groceries. The percentage of your income spent on each expense is up to you, but you can start with some basic rules of thumb, such as:

  • Housing – 25 percent
  • Utilities and HOA fees – 15 percent
  • Groceries – 12 percent
  • Dining Out – 10 percent
  • Transportation – 8 percent
  • Savings – 5 percent
  • Other expenses – 20 percent

Using this baseline, you can easily calculate how much you would be able to spend on each category if you have an income of $2,800 per month. These percentages can also be modified to meet your needs, as long as they still add up to a total of 100 percent.

When planning your budget, it usually helps to start with your housing and utility expenses. This baseline and a monthly income of $2,800 would give you $840 to spend on rent or a mortgage payment, and $420 to spend on utilities and HOA fees. To make this amount go further, you can downsize, look for a home in a more affordable area, or consider sharing a home with a roommate or family members.

If it still isn’t enough, you can adjust your budget to raise your housing allotment and lower another area. Groceries and dining out tend to be more flexible budget items. Eating at home more often generally saves money, but eating out can be an entertaining part of retirement.

A grocery budget of 12 percent would give you $336 for monthly groceries, while 10 percent on dining out would let you spend $280 at restaurants. Of course transportation to grocery stores, restaurants and other regular destinations also has to be a part of your budget. If you have a car, that means allowing money for both fuel and maintenance expenses.


Even after you’ve retired, it’s important to keep setting aside a portion of your income toward savings. This money can be used for unexpected bills such as medical or family emergencies. By keeping a liquid emergency fund, you may be able to avoid tapping into your nest egg when faced with surprise expenses.

Discretionary Spending 

The rest of your monthly income (in this case, 20 percent or $560) can be used toward your other discretionary spending like clothing, hobbies, entertainment or travel. You can break this down into more specific categories if it helps you stay on track.

If you need more money toward housing, groceries, transportation or other expenses, it will come out of this category. Living on a fixed income can be a challenge, but sticking to a budget will help you enjoy your retirement years without outliving your savings.