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4 Things to Consider When Budgeting for Retirement

Budgeting isn’t something many people get excited about doing, but when those paychecks stop rolling in and you’re depending on your savings, you don’t want to be without a plan. Creating a budget for retirement can help you keep track of your spending and make the most of the money you worked so hard to save. 

Determine What Your Retirement “Paycheck” Will Be 

PERA Benefit 

If you are in the PERA Defined Benefit (DB) Plan, there are three factors that determine your benefit: Highest Average Salary (HAS), amount of service credit, and age at retirement. All three of these factors will affect how much you receive from PERA in retirement. 

Your PERA benefit is also affected by which retirement option you choose. Option 1 is a single-life benefit and will give you the highest monthly benefit for your lifetime only. Option 2 is less than Option 1. It is paid for your lifetime and then, if you die, your cobeneficiary will receive 50% of your monthly benefit for the rest of their life. Option 3 will give you the smallest monthly benefit but, if you die, your cobeneficiary will receive 100% of your monthly benefit for the rest of their life.  You can view your estimated monthly benefit through your member dashboard and the estimates for each of these options. You can also use the “Projected Benefit Calculator” to see how retiring later and purchasing service credit could affect your monthly benefit.

Social Security 

Most PERA members do not contribute to Social Security while working for a PERA employer. However, if you have paid into Social Security, you want to make sure you collect your Social Security benefit. You can estimate your Social Security benefit and apply at ssa.gov. 

In 2025, the Social Security Fairness Act became law and the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) were repealed. This means your Social Security benefit is no longer reduced because you have a pension. The repeal of WEP and GPO does not affect your PERA benefit. You can learn more about Social Security and PERA by visiting the “PERA and Social Security” webpage.  

Additional Retirement Savings Accounts 

Between 2012 and 2023, the number of “dormant” retirement accounts almost doubled from 14.8 million to 28 million according to an analysis conducted by PensionBee. Before you retire, you want to make sure you know where all your retirement accounts are and how to withdraw from them. 

Start by listing your past employers. You can check past W-2 tax forms or old pay stubs for retirement account information. If it’s not in old documents, you can contact the employer’s benefits department. You can also check online data bases like the U.S. Department of Labor’s (DOL) Retirement Savings Lost and Found Database.  

Once you have a list of your retirement savings accounts, you can plan how you want to take out money from those accounts. You could leave the money in your accounts until you must take money out, known as a required minimum distribution (RMD). You could use your accounts to cover costs as you need to. You could take out a set amount each month as part of your monthly income. This “PERAPlus Savings in Retirement” Quick Tip video gives more information about each of these strategies. 

Create an Estimated Retirement Budget 

Now that you know how much your retirement “paycheck” will be, you can create an estimated retirement budget. To start, list your current monthly spending while you’re working and group your expenses into categories. 

Things like utilities, groceries, mortgage payments, taxes, and debt payments most likely won’t change in retirement unless you make a change. Commuting and work wardrobe costs might decrease now that you aren’t working. However, other expenses like eating out, traveling, and hobbies might increase because you will have more free time. 

You might also consider which parts of your retirement paycheck will cover these expenses. You might use your pension income and Social Security to pay for your essential expenses like housing, utilities, food, and health insurance. Then, you can use your individual retirement accounts or part-time work to pay for your additional and unexpected expenses. 

Budget for Major Expenses 

You may have heard “expect the unexpected,” and that’s no different in retirement. You should prepare for major expenses to pop up throughout retirement. These expenses include things like home repairs, travel, long-term care, inflation, and medical expenses.  

Medical expenses are a major expense for most retirees, and the cost is continuing to rise. According to the 2025 Fidelity Retiree Health Care Cost Estimate, the average 65-year-old retiree may need $172,500 to cover health care expenses. If you aren’t prepared, health care expenses could have a major impact on your retirement savings. 

PERACare, PERA’s health benefits program, provides health, dental and vision plans to retirees and their families. Additionally, PERA pays a subsidy to retirees and some cobeneficiaries and survivors to help offset health care premiums when enrolling in PERACare health coverage.

You also want to think about inflation costs. Inflation is a decrease in the purchasing power of money that can be seen in the increasing price of goods and services. This means a dollar today will be worth less in the future because it will buy less. Be prepared to cover inflation by savings more money now, changing your investment strategy, or spending less in retirement. 

Reduce the Debt You Take into Retirement 

Debt is a common and sometimes necessary part of many people’s life circumstances. As people prepare for retirement, they may be looking for a way to reduce their payments in retirement. If you can, reduce the amount of debt you take into retirement. 

By reducing the debt you take into retirement, you can reduce your expenses and have more flexibility in your retirement budget. If you are taking debt into retirement, include those payments in your retirement budget. Reduce as much of your debt as you can before you retire and then account for remaining payments in your retirement budget. 

Being prepared for retirement is more than saving, it’s knowing what you will receive in retirement and your expenses. With this knowledge, you’ll have a solid foundation when it’s time for you to retire. 

Sources:

  • Social Security. Social Security Administration. Accessed March 31, 2026.  https://www.ssa.gov.
  • PensionBee. “Nearly One-Third of All Workplace Retirement Accounts May Be Zombie 401(k)s, Finds PensionBee.” PensionBee Blog (January 21, 2026). doi: https://www.pensionbee.com/us/blog/nearly-one-third-of-all-workplace-retirement-accounts-may-be-zombie-401-k-s-finds-pensionbee. 
  • Retirement Savings Lost and Found Database. U.S. Department of Labor. Accessed March 31, 2026. https://lostandfound.dol.gov/. 
  • Fidelity Investments. “How to Plan for Rising Health Care Costs.” Fidelity Viewpoints (March 13, 2026). doi: https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs. 
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With the PERA Defined Benefit (DB) Plan, you’ll receive income in retirement that you can’t outlive.
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