You’ve taken the first important step towards a comfortable retirement by saving and planning for your future. You can even keep track of a budget for your golden years and understand how your retirement income from sources like Social Security, retirement, or a 401 (k) can help fund that dream. However, rising costs and unforeseen expenses may mean that your retirement income may not match your actual needs.

The difference between your retirement income and what you actually spend is called the retirement income gap, according to the United States. News and World Report.


As life expectancy increases and the economy faces unexpected changes, the amount of money needed to retire may be more than you anticipated or saved. A longer life expectancy can mean a longer retirement period and a larger potential money gap, according to Kiplinger. And rising health care costs can lead to more budget spending than expected.

But Kiplinger says economic factors also play a role. For example, lower interest rates can lead to lower returns on some investments. And raising the age of full social security benefits may mean less income than expected in the event of early retirement. Plus, changes in tax rates, a higher cost of living, and changes in the market can all happen and affect your budget, Kiplinger says.


Despite these threats to your retirement budget, it is possible to predict a gap. A financial professional can help you review your retirement plan and suggest strategies to avoid retirement income gaps.

Strategies such as increasing pre-retirement savings, planning longer work hours, or deferring Social Security benefits can help reduce the likelihood of a deficit, according to Time.

It’s also important to understand what sources of income you use for essential expenses like groceries and housing and what sources you use for discretionary non-essential expenses.

Experts from Zeit and Kiplinger recommend aligning guaranteed retirement income streams such as social security or pensions with essential expenses. A pension, says Kiplinger, is another great way to ensure a constant flow of income for life and to cover essential expenses in retirement. When you combine a pension with other sources of guaranteed retirement income, you can rest assured that your basic needs have been met.

The funds you have designated for discretionary spending may be invested in assets with greater market exposure and growth opportunities such as stocks, exchange-traded funds (ETFs) or mutual funds, says Kiplinger. This way, you can keep up with rising costs and better cope with unforeseen expenses. Having multiple sources of retirement income reduces the overall risk to your budget in the event that one source fails.

You don’t always expect differences in income in retirement, but there are ways to reduce the risk of them affecting your budget. And with a little planning, you can have more comfort and financial freedom during your golden years.