Living within A Retirement Budget

One of my goals for the next 2 years is to live on the amount of money I will receive for my pension when I retire. If I can keep my spending within that amount, I will be more confident letting go of full-time work. 

My first step is to figure out how much my pension will be. 

According to my retirement company’s calculator, I will receive 66% of the average of my 4 highest earning years. My 4 highest earning years will be the my last 4 years of employment. That average should be about 71K, and 66% of 71K is 46,860.

Can I live off of $46,860 a year? 

To determine if I can live on 46,860, I want to figure out what I am currently spending. 

I keep relatively good track of my spending overall, so I could add what I’ve spent over this past year together to make that determination. However, I want to start by approaching the task in an easier way. It feels like I have lots of money taken out of each paycheck for various things now. For example, my retirement system takes out 8%, I designate money to go to a 401K, I pay union dues, etc. 

If I can figure out how much is left after these deductions, I will have a rough idea of how much I spend a month. 

Let’s see how much currently comes out of my paychecks. I make about 70K, and I am paid 26 times a year, so my gross per paycheck should be around 2692. (I get paid 3 times a month for 2 months out of the year, but I’m going for a rough estimate, so I’m going to leave that money out for now.) 

My pay check shows what money is taken out before and after taxes.  Before taxes, my employer takes out 220 for my husband’s health insurance 2 times a month. That’s 440 per month. My husband reimburses me at 400 a month, so I’ll consider that just 40 is being taken out of my check per month, (20 per check). 

Ok. What else? Pre-tax, I have 660 per paycheck, 1320 a month, taken out for my 403B (the education version of a 401K).

My retirement system takes out 220 per paycheck,  440 per month, I believe, to support my future retirement/others’ retirement. 

Then, after tax, I have another 60 taken out to go towards my Roth 403B, so that’s 120 a month. The insurance part of my retirement plan takes out 14 per check, 28 per month to go towards my future insurance/others’ current insurance costs, I think.

Finally, my union dues are 35 per check, which is 70 a month. 

Let’s take my gross per check, then, and subtract the amounts taken out per check:
2692-20-660-220-60-14-35 = $1683. So 1683 is what is left after all deductions except for taxes.

Here is what the numbers look like per month (so, doubled):
5384-40-1320-440-28-70 = 3486.

If I am bringing home 3486 per month after all deductions but taxes, what is that per year? 
3486 x 12 = 41,832

I am currently receiving $41,832 a year out of my salary of 70K. Since I don’t have debt, I am currently living off that amount, which is less than what I will get after retirement: 46,860!

Based on these basic calculations, I can live off of 66% of my current salary. Woohoo!


Caveats ~ This isn’t the end of the story, though. As noted earlier, I receive 3 paychecks during 2 months of the year. Many of the deductions still come out of those checks (such as the retirement company’s deduction and the 403B), but others do not (such as the medical insurance premium for my husband). After looking at those 2 paychecks, I see I take home about 3K more than I have considered here. 

However, I also pay about 300 in taxes per month now, which would be taken out of the 41,830. During retirement, I will only have state taxes taken out of my checks, but I will also have to pay about 400 a month for health insurance. We’ll also have to figure out what to do about my husband’s health insurance. 

So there are quite a few more factors to consider, which I hope to do in future posts. 


For simplicity’s sake, for now, I am going to say that I currently spend less than what I will bring in during retirement. My goals will be to continue to spend this amount to “practice” being retired financially and to look at my spending in other ways to try to best understand the financial implications of the caveats stated above. 

Looking at money issues in multiple ways will help me feel more Peace Out (and In!),





  • Deb Snyder

    You did a very thorough job of analyzing your spending habits! Good job! We have found that we spend much less in retirement than we did when we were working. I hope you consider allocating some for travel and fun too.

  • Julie

    Thanks for the reply, Deb! I feel relief hearing that you spend less in retirement than when working. I am hopeful I will do the same.

    I have to admit that I put travel close to last in terms of priorities. I hope to change that though!


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