I’m a Financial Advisor: Here’s When Retirees Can Stop Budgeting

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Suze Orman is one of several money experts who has recently denounced budgeting. “I hate budgets,” she stated plainly in an interview with the Wall Street Journal, where she reasoned that excessive restricting, like dieting, only leads to eventual spending binges.

Instead of making a detailed spreadsheet with specific dollar amounts allocated for food, transportation, recreation, etc., Orman recommended saving a certain percentage of income per month and then putting the rest in a big pot and doing whatever one wants with it. The argument could be made that this is “budgeting-light,” but it’s loose enough to not qualify as formal budgeting. This method is also known as the anti-budget.

Is Budgeting Necessary in Retirement?

This approach is all well and good while someone is working and earning a steady paycheck. But what about retirees? Can they stop budgeting, too?

While comprehensive budgeting can often be more vital at this stage of life, doing away with it could be acceptable if one condition is met: The retirees have saved enough prior to retiring.

“Retirees may be able to stop budgeting if they know they’ve saved enough and have their basic expenses covered by reliable income sources,” said Chris Mediate, chartered wealth manager and president at Mediate Financial Services. These sources may include Social Security, a pension, a 401(k) and other investment accounts.

“This approach works well for diligent savers who are confident they won’t outlive their funds. Essentially, the more you save, the less you need to budget — provided that your essential needs are securely funded for life,” Mediate said.

In other words, if retirees followed Orman’s savings advice earlier in life, they are better positioned to stop budgeting in their golden years.

Some Can Relax Their Budget

Emanuel Eliason, president and CEO of Eliason Wealth Management, added that, over the course of their retirement, a systematic and detailed budget may not be as crucial for retirees with a solid net worth, since their lifestyles will be fairly stable.

“Unlike during their early accumulation phase, where they may have been experiencing several life events like marriage, moving to different cities, having children, putting kids through college, buying a new house and others, their retirement years will be most likely less volatile in terms of life changes that affect their financial outlook and therefore merit a thorough and ongoing budget,” Eliason explained.

Eliason agreed that eliminating a budget may not be wise for those who have little savings or a poor financial footing at the beginning of their retirement. After all, Orman’s strategy hinges on the idea that people make a large enough amount of money to be able to put some of it into savings in the first place.

So, while chucking that detailed budget could eliminate some stress for those retirees who started accumulating adequate savings early on, it’s ill-advised for those who didn’t.

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