Budgeting for Seniors on a Fixed Income: Complete Guide
Senior financial planning improves our quality of life in retirement and supports healthy aging, making it an important skill to learn.
Yet creating a budget presents different challenges for seniors on fixed income than those who are still working, often requiring older adults to learn new strategies and tips to live within their means and feel optimistic about their financial future.
Fortunately, comfortably living on fixed income is possible, and the tips and strategies below may make it easier. You deserve a retirement free of financial worries or anxiety about your future, and creating a realistic budget tailored to a fixed income can help.
Key Takeaways
Creating a realistic budget often starts with understanding social security and retirement income as well as essential expenses.
Along with paying for fixed expenses like rent or utilities, many seniors benefit from building an emergency fund and learning how to manage irregular expenses during retirement.
The best senior budgeting tips and senior discount programs can also make your dollar stretch further.
Understand how much money you have coming in
Before setting your budget, take note of how much money you have coming in. When you’re employed, this can vary with raises, promotions, or a new job. In retirement, it’s often a fixed amount. Fixed income could be from:
Retirement accounts
Social security
Investment accounts, including stocks, bonds, and cash investments
Some seniors also pick up a part-time job, which can provide additional income. Part-time job paychecks can fluctuate based on hours worked, any promotions, and more.
It’s also important to note that social security and retirement accounts have a set age when you can access them. 401K benefits, for example, usually start at 65. That said, sometimes these accounts can be accessed as early as 59 and a half.
You can start accessing social security benefits when you’re 60, but can’t take out the full amount until you reach “full retirement age.” That age depends on the year you’re born.
Additionally, keep in mind that everyone’s fixed income may look different, depending on how much they previously saved for retirement, the investments they have, and whether they work part-time. Even someone’s monthly social security payments can vary, though the average payment in January of 2025 was $1,976 a month.
To learn more about social security and other income sources during retirement, refer to the Consumer Financial Protection Bureau’s tools for financial security as an older adult.
Know your expenses
Knowing what money you have coming in matters, but it’s important to track money out as well. Predictable monthly expenses include:
Mortgage or rent
Health insurance costs (including those from Medicare and any Medicare supplement plans)
Property tax
Tax on any income
Utility bills
Transportation expenses
Internet and cable TV
One of the biggest expenses is rent or a monthly mortgage. If you have yet to hit retirement, paying off a mortgage beforehand can greatly lower your monthly expenses.
There are also ways to eliminate some expenses, such as getting free internet as a senior, or to lower them, such as getting a gym membership or cable TV plan with a senior discount.
Manage irregular expenses
Not all expenses can be predicted ahead of time. Many, like hospital bills or even a nice dinner out, are less predictable. To manage these expenses, consider creating an expense tracker or spending log. This tracker lets you keep a pulse on what you spend and understand where you may be overindulging.
To create, you can either use a digital spreadsheet or pen and paper. Write down the main categories where you spend money (variable transport costs, groceries, eating out, healthcare, pets, etc.) and log any expenses in each category on a daily, weekly, or monthly basis.
Save for emergencies
Emergencies pop up from time to time.
For many seniors, the most common emergencies are unexpected medical bills, though house damage from a storm, a need to repair the air conditioner, and countless other unexpected events can be costly too. To save for these, consider starting a “rainy day fund,” a separate bank account that you transfer a small amount into each month.
Along with saving for emergencies, plan ahead in case you are medically unable to make financial decisions. If possible, tell a friend, family member, or someone you trust where they can find your financial information, including bank passwords.
Signing up for internet banking services can also make it easier for a loved one to access your finances in the event of an emergency.
Money problems are also common for those with Alzheimer’s disease or dementia, and having a family member looking for any signs of memory issues can safeguard your financial well-being. Signs include:
Unpaid or overdue bills
An uptick in impulse buys
Purchases someone can’t remember
Missing money from a person’s bank account
Use coupons
Coupons are a great way to save money on costs like dinners out, groceries bills, and more. Some of the best places to find coupons include:
Flyers and brochures from local stores you frequent
Visiting a store’s website to search for any digital coupons
Join store loyalty programs
Browse the aisles, searching for any items on sale or generic options, which are often cheaper than name brand products
Check receipts, which sometimes offer coupons for your next visit
Browse the newspaper for coupons
Research senior discounts
Along with coupons, many stores offer senior discounts. With these programs, those over a certain age (usually somewhere between 55 and 65) can save on groceries, dinners out, travel, leisure activities, and more.
Some popular national chains with these programs include:
Some stores local to you may also have a senior discount program. Next time you’re at the grocery store, a favorite clothing shop, or another retail location you frequent often, ask if they have any discounts for seniors.
In addition to senior discounts, some Medicare plans offer ways to save. This usually applies to Medicare Advantage plans with a Medicare flex card, which is a cash-like benefit where you can use a set amount of money on the flex card to cover health-related expenses like medical supplies and transport to doctor’s appointments.
Bottom line
If on a fixed income, having a budget can help you take control of your finances, leading to a higher quality of life, less financial stress, and more time spent enjoying retirement.
To create a budget on a fixed income, start by detailing expected monthly income and set monthly expenses. From there, create an expense tracker for variable expenses, as well as an emergency fund. To make your budget go further, search for coupons and senior discount programs.
Frequently asked questions
How much should seniors spend on housing with fixed income?
Seniors living on a fixed income ideally should spend as little as possible on housing. If you aren’t yet retired, getting a mortgage and paying it off before retirement is a good goal. For those already retired who still have a mortgage, pay rent, or live in an assisted living community, 30% or less of your total income should ideally go toward housing.
What percentage of Social Security should go to healthcare costs?
Most people on social security also qualify for Medicare. A report from AARP found that those on Medicare spent $6,168 out-of-pocket on healthcare costs each year. Social security payments vary but are about $23,712 a year on average, meaning someone may expect to spend about 26% of social security on healthcare costs.
How can seniors create an emergency fund on fixed income?
If on a fixed income, you can create an emergency fund by setting aside a small amount of money each month.. Even setting aside $50 a month can help if an emergency arises in the future.
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