During your working years and “accumulation stage,” your salary helped define the size of your budget. But now, in retirement, with pensions replacing portions of your paycheck and the difference needed to be taken out of savings, your budget may need to be revised.

Meeting basic needs

Focus your attention on meeting the non-discretionary necessities of life. Food, clothing, housing, transportation, and health care are just some of the essentials of life that must be part of retirement budget. Be realistic in setting up this portion of your budget. Remember that healthcare costs will usually increase as you get older, and housing expenses grow due to property taxes and home repair costs. Depending on location and other factors, downsizing your house may not necessary translate into “less expensive.”

Discretionary expenses

Discretionary expenses are the costs of the things you want, but if need be, can live without. Travel, entertainment, and hobbies might be important elements of your retirement lifestyle, but they are not life essentials. You can scale back on your travel plans more easily than you can cut back on food or shelter. Discretionary expenses are in the “I want” portion of your budget instead of the “I need” section.

How much do you need?

Estimates vary, but 70 to 80 percent of your pre-retirement annual earnings should meet the lifestyle needs of most people in retirement. Granted, a more lavish lifestyle will increase the percentages, while a more frugal lifestyle will decrease them.

For guidance about where your lifestyle choice puts you as far as budgetary needs, go through the following list and mark each with a plus if you expect to pay more in retirement or a minus if you expect to spend less:

• Mortgage or rent

• Debt repayment

• Travel

• Large-scale purchases, such as for new furniture or a new car

• Medical care and medical insurance

• Taxes

If more of the items on the list have plus marks than minuses, then your retirement budget should be equal to or more than your annual earnings while you were working. This might also be a good time to sit down with your financial planner to review your anticipated retirement lifestyle so that it does not conflict with your retirement savings plan. If it does, then you must either make changes to your retirement lifestyle plans or increase your contributions to the retirement fund in order to meet your budgeted expenses.