Photo of a woman who is creating a budget for retirement.

Map out your retirement budget

There’s a lot to consider when it comes to your income needs in retirement. And a little advanced budgeting now may help you from feeling overwhelmed about your retirement finances later.

A good place to begin is with your sources of retirement income. Then estimate your expenses, separating them into essential and discretionary. Starting to build your retirement budget is really that simple.

Estimating retirement income and expenses

You may need to replace about 85% or more of your pre-retirement income in retirement.* For many people, it takes a combination of guaranteed income and other assets to cover this amount.

Next, you’ll want to think about your expenses. How are you going to celebrate your retirement? What are your dreams for the year ahead? These factor in, as do the necessities: food, lodging, transportation, health care, taxes and insurance. This worksheet (PDF) helps you examine for income sources and detailed expenses more closely.

Before you start plotting your budget in detail, know that for most people, different types of retirement income cover different expenses. A typical retirement budget may look like this:

Graphic showing what guaranteed income sources would be able to pay for essential expenses.

Graphic showing what assets to fund retirement could pay for discretionary expenses.

Build your budget

Fill out this printable budget worksheet (PDF).

When you’re finished, you can share it with your financial professional to start charting your retirement budgeting plan. You’ll just need these materials handy to get started on your budget:

  • Pay stub/salary information
  • Social Security statement
  • Retirement plan statements (from both current and former employers) and the percentage you’re currently contributing
  • Pension plan statement (if you have one)
  • Statement or balance for any other saving or investment accounts you have (such as an IRA)

Ready to get started?

  • Looking for estimates? Start visualizing retirement with your own info by visiting our planning tools and calculators.
  • Have a Principal retirement account from your employer? Log in to principal.com to access personalized planning, sign up for our quarterly newsletter and more. First time logging in? Get started here.
  • Interested in starting an individual retirement account (IRA) or consolidating other accounts into your existing one? Call 800-247-8000, ext. 2503 between 7 a.m. and 9 p.m. CT. Not familiar with IRAs? Here’s a refresher.
  • Got a financial professional? They can help you figure out your next steps. If you’d like to meet with one face-to-face, we’ll help you find one.

* The Real Deal: 2012 Retirement Income Adequacy at Large Companies, Aon Hewitt (http://www.aon.com/attachments/human-capital-consulting/The_2012_Real_Deal_Highlights.pdf) and Aon Consulting's 2008 Replacement Ratio StudyTM (http://www.aon.com/about-aon/intellectual-capital/attachments/human-capital-consulting/RRStudy070308.pdf).

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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