Retirement budgeting: Building your future

How much to save for retirement? It can be a tough question to answer.

According to a Bankrate survey, 58% of American workers said they were behind on their retirement savings goals. Of those, 37% said they were significantly behind.

If you’re worried about your financial future, you may be wondering how much to save for retirement.

Estimating retirement expenses can help you find the answer. Even if you’re still decades away from retirement, you can make a retirement budget to achieve your savings target.

In this article, we’ll share some retirement budget planning tips, including:

• How much to save for retirement depending on your situation
• How to create a retirement planning checklist or retirement spending plan, along with retirement budget examples
• How to determine your retirement expenses
• How to achieve your retirement savings goals

A retirement budget is a key part of your overall plan. It helps you understand what you’ll need and how your choices today support your future. By reviewing your spending and estimating future costs, you can get a clearer sense of how much income your lifestyle may require. This makes it easier to set practical savings targets and track your progress over time.

Your budget also connects with other planning steps, like learning about healthcare needs, taxes and possible income sources. Keeping a separate emergency fund adds stability, helping you handle surprises without throwing off your long-term retirement budget planning.

A retirement spending plan works best when it’s steady enough to cover your needs but flexible enough to change over time. Start with essential expenses, such as housing, food, utilities and transportation. These costs may make up a large part of your monthly spending. It can also help to estimate healthcare costs, since Medicare coverage and out-of-pocket expenses can vary. Medicare.gov can help you understand available coverage and costs. 

Then, include spending for the things you want to enjoy, such as hobbies, dining out, travel or time with family and friends. Review your retirement spending plan regularly as your needs, priorities and costs change. A flexible plan can help you manage everyday expenses while still making room for the retirement lifestyle you want.

According to Federal Reserve of St. Louis data released in 2025, the average annual spending for U.S. households headed by someone aged 65 to 74 is $65,354. Average annual spending drops to $55,834 for households with someone 75 and older. While these types of figures can be helpful benchmarks, you can more accurately estimate your retirement expenses by calculating what you’re spending now.

When making a retirement spending plan or budget, it can be helpful to split expenses into two categories: fixed and variable.

• Fixed expenses are costs you pay regularly each month, such as rent or mortgage, car payments and insurance.
• Variable expenses are costs that can fluctuate from month to month, such as entertainment, utility bills, groceries and medical expenses.

Once you break down your current budget, you can start estimating retirement expenses by considering what costs may increase, decrease or disappear altogether when you retire, as well as ones that are likely to remain the same. For example, your family expenses might decrease once your children are out of the house and financially independent.

The quality of your retirement depends upon the financial decisions you make now. Are you budgeting and saving? Are you putting away money in retirement accounts, such as IRAs (individual retirement accounts) and 401(k)s? If you open these retirement accounts early and contribute to them frequently, you’ll accrue interest on top of the money you saved through regular retirement budget planning.

Along the way to retirement, you may want to plan for life changes that could affect your spending. These changes can shape your financial plans and spending power in the years ahead. Here’s a closer look at how to plan a retirement budget:

Once you’re done estimating retirement expenses, think about the sources of your retirement income. The list might include:

• 401(k)
• IRAs
• Employer pension plan
• Social Security 
• Business income or part-time work

The Social Security Administration offers a calculator that can help you determine your estimated benefits and make a retirement budget. You can also use other retirement calculators to estimate how much income your savings will generate once you retire. From there, you can create a plan for drawing down assets from different savings vehicles.

Let’s say you hold 60% of your savings in an IRA and the remaining 40% in high interest rate savings accounts. You could plan to follow that same 60/40 split for income as you make a retirement budget. In this scenario, 60% of the income you need to meet your retirement expenses would come from your IRA. The rest would come from those savings accounts.

Remember that with a traditional 401(k) or IRA, required minimum distributions (RMDs) must start by age 73. These are the minimum amounts you generally must withdraw each year from certain tax-deferred retirement accounts. In 2033, the RMD start age will change to 75. That can affect your yearly retirement income total. Visit the IRS website for additional details to help you decide how much to save for retirement.

Emergencies don’t disappear once you retire, so it helps to build some flexibility into your plan. Instead of treating surprises as rare events, think of them as part of the rhythm of long-term financial life. 

Keeping a dedicated emergency fund separate from your everyday spending can give you a financial cushion when unexpected expenses arise. This money can help cover medical bills, home repairs or family needs without disrupting your regular budget.

It also helps to revisit your healthcare planning, since medical costs can shift as you age. Some retirees like to “stress test” their budget by imagining a few what-if scenarios to see how their plan holds up.

Checking in on your finances regularly keeps your plan adaptable rather than rigid. Building in room for the unexpected can make retirement feel steadier and less stressful.

Consider keeping three to six months’ worth of expenses in emergency savings for retirement. You can give your emergency fund some serious momentum with a great rate from a Capital One 360 Performance Savings account that helps every dollar go further. You might still want to have three to six months in an emergency fund as part of the retirement plan.

Budgeting supports retirement savings goals by giving your plan structure and helping you stay consistent over time. When you review your spending and map out expected costs, you can see the gap between what you’re saving now and what you may need later. That clarity makes it easier to set realistic savings targets and adjust your habits as life changes.

Knowing how to plan a retirement budget also helps you stay steady during surprises. Over time, these habits build discipline and confidence, creating a smoother path toward financial stability throughout retirement.

A retirement planning checklist can help you stay focused on the budgeting habits that support long-term goals. Here’s how to do it:

• Review your spending to understand where your money goes today. 
• Set clear savings targets for both short- and long-term needs. 
• Build a dedicated emergency fund to handle unexpected expenses without disrupting your financial plan.

It also helps to revisit your monthly budget regularly, adjusting as your income or expenses change. Focus on learning the basics about estimating retirement income or understanding healthcare and tax considerations. If you need additional support, contact a financial advisor or tax professional about how to plan a retirement budget.

You can also consider signing up for an automatic annual contribution rate increase if your plan offers that feature. Increasing your savings by even 1% annually could make a major difference in how much you’re able to save in the long run. With Capital One Recurring Transfers or Autopilot, you can grow your savings automatically by scheduling recurring transfers that fit your specific budget and timeline.

Retirement budgets vary widely depending on the lifestyle you envision. Check out these retirement budget examples:

• One retiree might embrace a modest, quiet routine by monitoring monthly spending and prioritizing essentials such as housing, groceries and healthcare. 
• Another might plan for a more active lifestyle, building in travel, dining out and regular activities, which calls for clearer savings targets and a budget flexible enough to support those choices. 
• A third retiree might face unexpected expenses, relying on a well-maintained emergency fund to stay on track without disrupting long-term plans.

Your ideal retirement budget will depend on your personal financial situation and goals. Staying on top of your finances can make it easier to track your progress and adjust your approach as your needs change.

Having the right tools can make that easier. Capital One’s top-rated mobile app helps you stay connected to your finances.

A positive mindset can make retirement budgeting feel more approachable. Rather than seeing a budget as restrictive, think of it as a plan for supporting the retirement lifestyle you want.

While many aspects of retirement planning can be managed on your own, some decisions may benefit from professional guidance. A financial professional can clarify your options and help you make informed decisions. 

Taking a proactive approach can help you create a retirement plan that supports your peace of mind and the lifestyle you want to enjoy. Here’s what to keep in mind as you plan for the future:

• A retirement budget turns your priorities into a realistic spending plan that reflects your goals, needs and lifestyle throughout retirement. 

• Small, consistent planning habits help prepare you for financial changes over time and keep your retirement strategy aligned with your evolving needs. 

• Expert guidance makes complex retirement planning decisions easier to understand, giving you greater confidence as you prepare for your financial future.

Once you have a plan in place, choosing the right accounts can help you put that plan into action. Consider opening a Capital One 360 Performance Savings account or 360 CD to help grow your savings.