The One Budgeting Rule Retirees Should Follow in 2025, According to Experts

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Budgeting is essential at every stage of life — but in retirement, it’s critical. With a fixed income and rising costs, retirees need a clear plan for how much they’ll spend and where the money will come from.

To help, GOBankingRates asked financial experts to share their top budgeting rule retirees should follow in 2025 — here’s what they said.

Start With a Retirement Budget Reality Check

You can’t create a budget in retirement without first knowing where you stand.

“The most important budgeting rule I give to retirees is simple — know your numbers,” said Melissa Murphy Pavone, CFP, CDFA, founder of Mindful Financial Partners. These numbers include:

  1. Assets: What you own
  2. Liabilities: What you owe
  3. Income: What you earn
  4. Expenses: What you spend
  5. Credit score: Your borrowing ability

“Once you have a clear picture of where you stand, you can work with a CFP to create a retirement plan that aligns with your lifestyle and goals,” Pavone said. “Too often, retirees budget based on assumptions rather than facts.”

Use RMDs Strategically To Support Your Budget

“When budgeting, consider how much you will be required to take out of retirement accounts each year,” said Michelle Riiska, ChfC, financial planning consultant at eMoney Advisor.

Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year, typically beginning when you reach age 73.

“Since you have until Dec. 31 of each year to take the required distribution amount, being mindful of timing can help you stick to your budget,” Riiska said. “Taking monthly payments can spread out your RMD throughout the year to help pay expenses.”

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If your RMDs are larger than the amount you need to live on, use them wisely.

“After ensuring you have enough saved in an emergency fund to cover any unexpected expenses, consider reinvesting unneeded funds in a taxable account to avoid missing out on growth potential,” Riiska said.

Avoid Overspending From Your 401(k) or IRA

Josh Dunn, CFP, wealth advisor with Legacy Wealth Management, said that the biggest budgeting mistake retirees make is treating their 401(k) or IRA like a checking account and withdrawing whatever they want, instead of having a withdrawal strategy to ensure those funds will last.

“The challenge many have is that their primary retirement income source, their IRA or 401(k), has no limitations,” he said. “We can take out as much as we want at any time. This is a great feature in that it allows virtually full liquidity; however, it is also a dangerous temptation.”

Dunn noted that when you make excessive withdrawals from retirement accounts, that money is gone forever.

“Your retirement plan is most likely built with an assumption of a reasonable spending level, and treating your retirement accounts like checking accounts will throw a complete wrench into that plan,” he said.

Plan for Surprise Costs in Retirement

It’s important to set room in your budget for unexpected healthcare costs, or home or auto repairs.

“By being prepared, you can avoid having to draw down accounts prematurely or taking on debt to shoulder one-time expenditures,” Riiska said.

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