Budget Teeter-totter

WIIFY (what’s in it for you) with this post?  Learn or refresh yourself on budgeting (and its counterpart – actual spending) from the Budget Teeter-totter!

Budget Teeter-totter

Budget Teeter Totter - v2

Budget Teeter-totter quick guide
Green – good – expenses and income in balance.
Red – bad – expenses exceed income.
Yellow – good and bad – income exceeds expenses but may cause ‘surprises’ with income or estate taxes.

Good news-bad news-good news
I’ve got good news and bad news and good news.  The good – you’re retired or thinking about it and want the best you can attain.  The bad – if you’re like 99% of us, you’re going to be on what’s called a ‘fixed income’.  The other good news is that with planning, prioritizing, and budgeting, you can avoid surprises!

Two pieces to planning – income and expenses
Bottom line from this section – know your planned income as it will dictate what you can spend without ‘surprises’. www.ssa.gov has a retirement estimator that you (and your spouse if you have one) can estimate your Social Security benefits. You will also need to estimate your income from any pension and IRAs/401(k)s/403(b)s and don’t forget required minimum distributions (RMDs).  Lotta letters/numbers there…  Frankly, if you don’t do this a lot, you might want to strongly consider a trusted financial professional.  Designation Check can help you find a Chartered Financial Consultant (ChFC) and here’s a place to find a Certified Financial Planner (CFP) finder.   On my personal income side, I include Social Security, a small pension, 401(k), and savings.  I reduce the income by my forecast of Federal and State income taxes.

Bottom line from this section – know your expenses and have a budget that leaves you in the green (or yellow) on the Budget Teeter-totter.  On my expense budget side I include:
-Utilities – gas, electric, water, phone/internet/TV (too much!), cell phone, trash, homeowners association dues
-Forecast medical insurance expenses (if I retire pre-65 COBRA or exchange rates, post-65 a Medicare supplement)
-Property tax
-Car licenses
-Homeowners insurance
-Car insurance
-Personal insurance (life, LTC)

Actions you can take:
-Learn about RMDs. IRS RMD information.
-Start researching your retirement income and/or budget.
-Let me know in the comments or via ‘Contact’ what else you’d like to see in the expenses.

Up next – You’re gonna die! But we can help with a surprise there, too.  Look for the next update on Friday, July 21 at 12:30 PM.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

The Pyramids, actually the retirement income pyramid.


When we say ‘surprises’, we mean surprises that can damage your retirement income plan and by ‘damage’, we mean permanently lower your retirement income.  We will focus on ‘surprises’ can increase your retirement budget (spending more than planned) or decrease your income (or not have it increase as you expected).

The retirement income pyramid (below) shows you income sources you may have by decreasing levels of income surprise-ability (which you might also recognize as risk). Green – less surprise-ability.  Orange, yellow and red – more surprise-ability We’ll take small bites.

Income pyramid - png - v5

For today, let’s look at Social Security.  Down at the bottom in a safe green color, it must be safe from surprises right?  Yes and no:

-Government guaranteed (and you can vote to help maintain that)
-Inflation protected (to an extent) with potential for an annual cost of living adjustment (COLA).

-Medicare premiums come out of Social Security – if you don’t subtract your Medicare premiums from your gross Social Security, you may be planning to spend more that you receive – a bad retirement surprise!
-COLA protection with Social Security is based on a different Consumer Price Index (CPI) than you commonly see on the news which can give lower COLAs than the inflation your budget experiences.  If you don’t plan your budget on the Social Security COLA CPI, you could end up with too little cash  – a bad retirement surprise!
-Healthcare inflation hits Medicare, so Medicare premium increases can exceed any Social Security COLA – if you plan on a COLA increase in your budget and don’t factor in a Medicare premium increase, you may have a budget problem – a bad retirement surprise!

Up next – the Retirement Teeter-totter.  Look for the next update on Friday, July 14 at 12:30 PM.

Actions you can take:
-Learn about Medicare premiums. Paying Medicare premiums.  Medicare costs.
-Learn about Social Security COLAs  – www.ssa.gov COLA Fact Sheet (pdf)

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.






Why you should read and follow this blog. What’s in it for you? (WIIFY)?

WIIFY – What’s in it for you?
Have a better retirement by:
-Learning about potential retirement surprises
-Taking actions to mitigate or avoid them.

As ‘No Surprises Retirement’, we will try to help you avoid bad surprises, primarily on the expense side of the ‘budget teeter totter’ (more on that in a future post).  I want to help you avoid surprises that could damage (i.e. permanently lower) your retirement income. Many fine books, blogs, and advisors will give you direction on income accumulation and investment allocation; we won’t do that here.