How to Budget on Fixed Income Before Retirement

The budget mistake that drains retirements

Here’s the quiet leak I see, again and again, right in the first 24 months: people retire with a single blended budget number in their heads, instead of two. They never split must-pay bills from lifestyle spending before their income goes fixed. And when markets wobble or a premium jumps (they do), the groceries, dinners out, and the grandkids’ flights don’t flex fast enough. Cash flow buckles. I’ve watched otherwise careful savers burn through a year’s cushion in six months. It’s avoidable.

Make this concrete. Your fixed costs are the bills that keep the lights on whether you travel or sit at home:

• Housing: mortgage or rent, property tax, HOA
• Insurance: health, Medicare supplements/Part D, home, auto, umbrella
• Taxes: federal/state estimated payments, payroll leftovers if any
• Utilities: power, water, internet, mobile
• Debt: car loans, HELOCs, student loans (yes, parents still have them)

Everything else is variable wants. Coffee runs, gifts, pickleball gear, great, enjoy them. But they can’t mix in the same bucket. When they do, lifestyle creep from your last high-earning years becomes the baseline for a fixed-income future. That’s how a 2023 spending level sneaks into 2026 Social Security reality. I’ve done it myself, by the way, last year I kept my “city lunches” habit rolling into a few months of semi-retirement testing; the card statement was not amused.

Why this matters extra in 2025: the sticky stuff is still sticky. Shelter inflation has stayed hot relative to headline CPI; BLS data showed shelter running roughly 5-6% year over year through the middle of 2025 while headline inflation eased closer to the low-3% range. Home insurance has been worse. Bankrate reported in 2024 that the average U.S. homeowners premium jumped about 20% year over year, and many carriers pushed additional increases into 2025, especially in coastal and wildfire-prone states. On health costs, the 2024 KFF Employer Health Benefits Survey showed average family premiums rose 7% to $24,275, different population than retirees, yes, but it’s a clear picture of the cost pressure pipeline that hits Medigap, Medicare Advantage, and ACA plans with a lag. Ignore that gap and you’ll be patching holes with portfolio withdrawals at the worst time.

Then there’s the calendar trap. Annualized bills, property taxes, insurance premiums, even car registration, need to be converted into monthly sinking funds. Sounds boring; saves your bacon. If property tax is $9,000, that’s $750 a month into a dedicated bucket. Same for a $3,600 home policy ($300/mo) and a $1,200 auto premium ($100/mo). Miss this and the April/October double-whammy wrecks your “we’re doing fine” narrative.

Rule of thumb: lock your fixed bills at or below guaranteed income (Social Security, pensions, annuity floors). Spend from investments only on the variable list. First 24 months set the anchor, and anchors are stubborn.

What you’ll get from this section: a simple, practical how-to-budget-on-fixed-income-before-retirement checklist; a way to translate annual bills into monthly targets; and a reality check on 2025’s insurance and housing dynamics so your first-year spend doesn’t force “make-up” withdrawals later. That chasing-losses behavior, selling more shares after a bad quarter just to pay an ugly premium, is what we’re avoiding. Get the split right now, and the rest of your plan gets a lot easier. No heroics; just clean buckets and honest math.

Map the money you’ll actually live on

Time to flip the script from “I think we’ll be fine” to a literal list of incoming dollars. Paychecks are simple. Retirement income isn’t. Pensions have COLA caps (or none), annuities behave like mortgages in reverse, Social Security is timing-sensitive, and rentals are lumpy. So we’ll build a dead-simple inflow sheet you can run in 2025’s rate and policy setup without a PhD or twelve browser tabs.

Step 1: List fixed-ish sources, one line each (monthly, after known deductions):

• Pension: Note whether it has a COLA and how it’s defined. Many public plans cap COLA at 2% or tie it to CPI; some private plans have no COLA. If your plan says “2% max,” assume 0% in bad years and 2% in good years, not an average. Trust me, I’ve watched people over-credit this line and it hurts later.
• Annuities: Split by type.
  • Immediate (SPIA/DIA in-pay): Put the guaranteed monthly amount. If there’s inflation indexing, write the rule (rare outside custom riders).
  • Deferred not yet in-pay: put the start date and estimated first payment. Don’t double-count the asset value and the future income.
• Social Security (SS): Model multiple claiming ages (62-70). From Full Retirement Age to 70, benefits earn delayed credits of 8% per year under current law. Coordinate spouses for survivor protection: the higher earner’s benefit becomes the survivor benefit. Also remember taxes, up to 85% of SS benefits can be taxable depending on provisional income rules.
• Rental income: Put net of vacancies and repairs. As a rough input, many small landlords use a 5-8% vacancy factor plus a maintenance reserve (I use 1% of property value per year for older roofs; call me scarred from a 2018 leak).
• Other guaranteed/minimums: Disability or small lifetime benefits, trust income, etc. If it’s variable, label the floor only.

Step 2: Plan the bridge years (this is where most people get tangled):

• Retiring before SS begins: Identify gap-year income sources: cash bucket, part-time work, Roth contributions basis, or scheduled IRA withdrawals.
• Retiring before Medicare (65): Health insurance is the elephant. The enhanced ACA premium subsidies are in place through 2025 (per the Inflation Reduction Act of 2022), which keeps premiums more manageable if you manage MAGI. This is where precise withdrawal choices matter.
• RMD timing: Required Minimum Distribution age is 73 under SECURE 2.0 (effective 2023). If you’re 63-72 now, you have a window to do tax-bracket management, more on taxes in the next section I haven’t written yet, but it’s coming.

Step 3: Use current cash yields intelligently

Short-term yields have stayed elevated through 2024-2025. In practice, that’s meant many high-yield savings and 3-12 month Treasuries/CDs showing roughly 4-5% APY for much of this period (precise quotes change week to week). That’s perfect for near-term “spending buckets” covering the next 12-24 months. I favor a rolling 6-12 month Treasury/CD ladder for the bridge years; keep it boring. And if rates slip later this year, fine, you’ll reset gradually, not all at once.

Okay, here’s the sheet (and yes, it’s simple on purpose):

1. Fixed lines (monthly): Pension $X (COLA rule: ___), Annuity $Y (type/rider: ___), SS Scenario A/B/C $___, Rental net $___.
2. Bridge lines (monthly): Cash ladder draw $___, Part-time $___, IRA/Roth planned draw $___ (note tax impact), HSA reimbursements $___ if applicable.
3. Total guaranteed/floor: Add pension + annuity floors + minimum rental + current SS selection.
4. Compare to fixed bills: From the earlier section: fixed bills should fit at or below this floor. If not, adjust SS timing, annuitize a slice, or trim fixed commitments. No shame in moving a car payment off the list; math is math.

Quick reality checks: (1) SS at 70 is higher, but you need bridge cash, run both scenarios. (2) Survivor benefits track the higher earner; protect that line first. (3) Keep near-term cash in Treasuries/CDs/HY savings while yields are still attractive. (4) Don’t forget taxes, up to 85% of SS can be taxable, and RMDs at 73 can bump brackets.

One last thing, because enthusiasm spike here, coordinating SS with a small immediate annuity can stabilize years 1-10 so you can wait for that 8%/yr SS credit. It’s not elegant, but it works. I’ve seen it smooth plans more than any fancy Monte Carlo tweak.

Build your non‑negotiable budget (then pressure test it)

Okay, now translate those must‑pays into a 12‑month, seasonally honest budget. No smoothing, no averages that hide the ugly spikes. This is your floor. If your guaranteed income (SS + annuity + pensions + bond/ladder interest + net rent) can’t reliably cover this floor every month, you fix the income mix or you trim the floor, plain and simple.

Annualize the irregulars so they don’t ambush you:

• Property tax: Put the real due dates on the calendar. If your county bills twice a year, split it into 12 equal buckets. As a sense check, the U.S. median effective rate was about 0.91% of home value in 2023 (Tax Foundation), but your zip code may be wildly different. Use your bill, not a national average.
• Insurance: Homeowners and auto renewals often jump, and yeah, it’s been rough this year. BLS data shows motor vehicle insurance inflation running high in 2025, up around the high‑teens year‑over‑year in late summer (BLS CPI detail, 2025). Build in the new premium, not last year’s.
• Medical deductibles & big out‑of‑pockets: Don’t assume a quiet year. In 2024, the ACA maximum allowed annual out‑of‑pocket was $9,450 for an individual and $18,900 for a family (HHS). That’s the ceiling. You may not hit it, but pressure‑testing against a bad year is smart.
• Subscriptions/memberships: Annual software, warehouses, security systems, move them into monthly buckets so the December pile‑up doesn’t wreck cash flow.
• Family travel: If you always fly to see kids at Thanksgiving and spring break, it’s not discretionary; it’s tradition. Annualize it. Airfares bounce, pad a bit.

Healthcare line item (don’t underbuild this):

• Premiums: Use the actual 2025 premiums you’re paying or quoted for your open enrollment. If you’re pre‑65, compare ACA Silver plans for your county. KFF reported marketplace benchmark premiums rose in 2024 by about 4% on average; some regions saw more. Directionally, 2025 stayed elevated, shop, don’t assume flat.
• Deductible + OOP plan: Budget at least the deductible. Then keep a separate contingency for a high‑expense year (e.g., half the OOP max). It’s conservative, but medical costs are lumpy.
• Prescriptions: Use today’s copays plus a 5-10% bump; drug pricing has been sticky. If you use specialty meds, plan for tier changes.
• HSA strategy (if eligible): For 2025, HSA contribution limits are $4,300 self‑only and $8,550 family, with a $1,000 catch‑up at 55+ (IRS). Pre‑65, pairing an HSA with a high‑deductible plan can work, fund it aggressively if you can, then pay cash for small stuff and let the HSA grow.

Housing (don’t forget the boring stuff):

• Maintenance reserve: A practical rule of thumb is 1%-2% of home value per year. Not a law; a 20‑year‑old roof and two heat pumps push you toward 2%. New build in a mild climate, maybe closer to 1%.
• Utilities & HOA: Use 12 months of actuals, winter heat and summer A/C spikes matter. Don’t average a single quarter and pretend it’s fine.

Debt (lock the plan before retirement):

• Fixed payoff schedule: Decide whether you’ll carry the mortgage into retirement or accelerate it. Either way, put the exact payment in the floor. No hand‑waving.
• Variable‑rate debt: This is the wild card when rates jump. The average credit card APR on assessed accounts hit 22.8% in Q2 2024 (Federal Reserve). If you’ve got balances, you need a fast payoff timeline or a low‑rate consolidation, don’t build a retirement plan on 20%+ money.

Create the “Floor vs Flex” split:

• Floor (fixed essentials): Mortgage/rent, property tax, insurance, utilities, groceries at a realistic baseline, transportation to work/medical, healthcare premiums + expected OOP, minimum debt payments, basic connectivity. This must be covered by low‑volatility income every single month.
• Flex (discretionary wants): Dining out, hobbies, extra travel, gifts beyond your tradition line, nicer car upgrades, home projects that can slide a quarter.

Pressure test the floor against stuff that actually happens: a 15% insurance renewal shock, property taxes up 8% after a reassessment, hitting the medical deductible in January, a $2,000 car repair, or a 2‑month vacancy on the rental. If your guaranteed income can’t swallow those without selling equities at a bad time, tighten the floor or add more guarantee (yes, that might be a small immediate annuity; not romantic, but it works).

One more real‑world note: rates are still not “low” this year, we’ve been living around 6.5%-7.5% 30‑year mortgage quotes for much of 2025, and cash yields are attractive but not guaranteed to stay here. So build the floor on today’s bills and income, then keep an eye on resets. I know this sounds like a lot, and it is, but once you get the 12‑month map, the rest of the plan stops wobbling. And if a line item feels fuzzy, that’s normal; write the conservative number, star it, and revisit after one full billing cycle.

Design the 3‑bucket cashflow that survives 2025

This isn’t about guessing where rates go next. It’s mechanics, set the pipes so cash shows up when you need it, regardless of what markets do. Here’s the setup I keep coming back to with clients (and frankly, my own family budget):

• Bucket 1 (0-24 months): the spending floor. Park 12-24 months of required withdrawals in high‑yield savings, T‑bills, and staggered CDs. Automate a monthly transfer from this bucket into checking, same day every month, so bills get paid without you staring at the S&P quote. T‑Bills are simple and flexible: you can buy in $100 increments and pick 4, 8, 13, 26, or 52‑week maturities. Earlier this year, 6-12 month Treasuries were quoted in the mid‑4% to low‑5% range; that floats, so don’t build your plan on a single yield. Keep FDIC/NCUA insurance in mind: standard coverage is $250,000 per depositor, per insured bank, per ownership category, spread CDs if you need more room.
• Bucket 2 (2-7 years): your refiller. Use short/intermediate bond funds, or a ladder of individual Treasuries/IG corporates maturing across years 2-7. The job is to refill Bucket 1 on a schedule, quarterly or semiannual is fine, so you’re not selling equities during a slump. Personally I like a 5‑year Treasury ladder that rolls annually: every year a rung matures, tops up Bucket 1, and you add a new 5‑year rung. Boring, repeatable, cheap.
• Bucket 3 (7+ years): diversified equities (US, international, some small/value tilt if that’s your thing) for growth that offsets inflation and healthcare drift. Social Security’s 2025 COLA is 3.2% (SSA announced it last October), which helps, but medical costs have a habit of running hot over time. Give this bucket room to compound.

Refill & rebalance rules

• Good markets: harvest gains from Bucket 3 to refill Bucket 1 and keep Bucket 2 on target.
• Bad markets: skip equity sales; spend from Bucket 1 and scheduled maturities in Bucket 2. That’s how you cut sequence‑of‑returns risk. If the drawdown lingers past 18 months, tap fresh maturities in Bucket 2 before you even think about selling stocks.

Savings autopilot (so December doesn’t blow up March)

• Set up sinking funds for known annual hits: insurance renewals, property taxes, holiday travel, tuition, HOA dues. Move 1/12th monthly from Bucket 1 into a labeled sub‑savings. When the bill lands, you pay it, no drama, no raiding investments.
• Match maturities to dates: if property tax is due every April and October, set a pair of 6‑month T‑Bills to mature in March and September. It’s oddly satisfying when cash just shows up on cue…

How much in each bucket? Quick rule of thumb I actually use: 18 months of net withdrawals in Bucket 1; another 3-5 years of expected withdrawals in Bucket 2; the rest in Bucket 3. If you’re retiring early or your income is lumpy, consulting, rentals, stretch Bucket 1 to 24 months. Yes, it feels conservative. That’s the point.

One last practical bit, rate reality in 2025. Mortgage quotes around 6.5%-7.5% have kept housing activity soft this year, while cash still pays meaningfully more than it did a few years ago. I wouldn’t bank on today’s cash yield sticking forever; build your floor on today’s expenses, automate the transfers, and let the ladder do the adjusting. The forecast matters less than the plumbing; get the plumbing right and the budget stops wobbling.

Pre‑retirement tax moves that make your budget bigger

Small tax plumbing now means fewer surprises later. I’m not talking exotic shelters; I mean timing income, picking the right account for the right asset, and minding thresholds that trigger higher taxes. The payoff shows up as a steadier monthly budget once paychecks stop.

• Use the gap years for Roth conversions. The window between retirement and Required Minimum Distributions (RMDs) is gold. Current law has RMDs starting at age 73 in 2025 (SECURE 2.0). Converting slices of your traditional IRA to a Roth while your taxable income is temporarily lower can shrink future RMDs and the taxes they drag with them. I usually “fill up” a target bracket, say up to the top of the 12% or 22% bracket, so I’m not accidentally paying 24% on the last dollar. And yes, I’ve overconverted before; watching Medicare IRMAA hit two years later is a quick teacher.
• Mind ACA premium tax credit math if you’re under 65. If you’re buying health coverage on the exchange, remember the Inflation Reduction Act kept the 8.5% cap of household income for the benchmark plan through 2025 (no hard 400% FPL cliff this year). Big conversions or capital gains can raise your MAGI and claw back subsidies. I sometimes split a planned $80k conversion into two tax years just to keep the premium outlay from jumping. Not elegant, just effective.
• Put the right assets in the right accounts (asset location). Tax‑inefficient stuff, taxable bonds, high‑yield bond funds, REITs, belongs in IRAs/401(k)s where the ordinary income is shielded. Broad equity index funds and ETFs can sit in taxable accounts, where qualified dividends and long‑term gains get better rates. And if you hold munis, keep them in taxable (their tax benefit is wasted inside an IRA).
• Harvest capital gains while rates are friendly. Before Social Security starts, you may be in a lower bracket. The 0% long‑term capital gains bracket can apply while you’re in the 12% ordinary bracket (2025 tax law still in place this year). Realizing gains to reset basis reduces future taxes when you need cash. But, and this is where I’ll correct myself, don’t do this blindly. Gains increase MAGI, which can nick ACA subsidies and even set up higher Social Security taxation later. Coordinate the calendar.
• HSAs: the stealth medical IRA. If you’re HSA‑eligible, 2025 contribution limits are $4,300 self‑only and $8,550 family, plus a $1,000 catch‑up at 55+ (IRS, 2025). Let the HSA grow and pay routine care out of pocket if you can; qualified withdrawals for medical expenses are tax‑free. Keep receipts, future you can reimburse later.
• Plan for Social Security taxation. The thresholds for taxing benefits are stuck in time, $32,000 of provisional income for married filing jointly ($25,000 single) to start taxing up to 50% of benefits, and $44,000 MFJ ($34,000 single) where up to 85% can be taxable. Those levels date to the 1980s/1990s and aren’t indexed. Translation: larger IRAs = larger RMDs = more of your benefit taxed. That’s why we circle back to Roth conversions during the gap years.
• Don’t forget state taxes. A conversion in a high‑tax state can cost more than waiting until you change domicile. And some states don’t tax Social Security or offer retirement income exclusions, worth checking before you pull the trigger.

Quick anecdote: a couple I worked with retired at 62, lived on cash and a small taxable account, and converted $60k-$90k a year until 70. By the time RMDs began at 73, their IRA was 40% smaller than it would’ve been, their Medicare brackets stayed lower, and their monthly “tax drag” was a few hundred dollars lighter. Boring moves, big effect.

And one more thing I should clarify: there’s nothing wrong with paying some tax now. The goal is paying it on your terms, at known rates, in years with lower MAGI, without tripping ACA or Medicare landmines. Do that, and the budget breathes easier.

If you skip this, here’s what usually goes wrong

I’m going to be blunt because 2025 isn’t giving retirees a lot of mulligans. Rates are still way higher than the 2010s, equity markets have been choppy again since late summer, and health costs keep creeping. If you leave your plan “good enough,” the math tends to leak in all the predictable places.

No floor‑vs‑flex budget? When markets wobble, lifestyle spending crowds out essentials. It starts small, extra travel, gifts, house stuff, and then a -15% quarter hits and you tighten… but not on Medicare premiums, utilities, taxes, or insurance. We saw the template in 2022: the S&P 500’s total return was -19.4% and the Bloomberg U.S. Aggregate Bond Index fell -13.0% (worst bond year on record at the time). A plain 60/40 was down about -16% that year. If your mortgage, Medicare, and groceries were funded from the same bucket as vacations, you probably cut the wrong line items at the worst time. I did, too, once, long story involving a kitchen remodel during a correction. Not my sharpest call.

No bucket plan? That’s how you end up selling stocks in a downturn to pay bills, classic sequence risk. The early negative returns don’t just feel bad; they reduce how long the portfolio lasts. You don’t need a PhD to see the problem: withdrawing 4-5% while markets are down 20% leaves a dent that never fully heals, even if the rebound is decent. It’s avoidable with 1-3 years of cash for essentials, 3-7 years in bonds and TIPS, equities for the long tail. Boring, repetitive, but it works.

Skip tax prep before RMDs? You’ll likely pay more for the same retirement. SECURE 2.0 pushed RMDs to 73, but waiting without any conversions often means higher lifetime taxes once Social Security and RMDs stack. And if you miss an RMD, the IRS excise tax is 25% (reduced to 10% if corrected in a timely manner), needless money out the door. Also, higher MAGI can trigger Medicare IRMAA surcharges; those premiums aren’t theoretical, they hit your bank account. People think, I’ll just figure it out when I’m 73… and then regret the bracket creep.

Ignore healthcare and insurance inflation? Balanced budgets quietly turn into deficits inside 12-24 months. Yes, headline CPI cooled from 2022 peaks, but medical costs don’t march to the same drummer. Even when broad inflation eases, premiums and out‑of‑pocket costs have a habit of ratcheting. Social Security’s 2024 COLA was 3.2% (for benefits paid in 2024), which didn’t fully cover many retirees’ increases in Part B, Part D, Medigap, and homeowners insurance. That gap compounds. Two years later you’re wondering why the checking account feels thin.

And one thing I forgot to say earlier: property and casualty insurance has been its own mini‑inflation since last year, claims severity, reinsurance costs, climate exposures. If you don’t reserve for those hikes, they’ll ambush your “discretionary” line. They always do.

What it costs to do nothing in 2025’s setup

• Higher lifetime taxes because conversions never happened during your lower‑income gap years.
• Permanent portfolio shrinkage from selling equities during down months to fund basics.
• Medicare surcharges and phase‑outs eating hundreds to thousands a year, avoidable with planning.
• Insurance and healthcare creep turning a 3% COLA into a 0% real raise, then negative.
• Psychic tax: spending your first years of retirement plugging cash holes instead of enjoying the time you worked for. That’s the part that stings.

Action checklist (do this now, not “after the holidays”):

1. Map every inflow by month for 24 months: pensions, Social Security, annuities, expected RMDs, dividends.
2. Lock your floor budget: housing, food, utilities, insurance, medical, taxes. Put those on autopay from a dedicated “floor” account.
3. Set 3 buckets: 1-3 years cash/T‑bills for essentials; 3-7 years in high‑quality bonds/TIPS; the rest in diversified equities.
4. Automate sinking funds for irregulars (property tax, insurance, car, travel). If it will happen, pre‑fund it.
5. Run a tax plan for 2025-2028: partial Roth conversions in low brackets, watch IRMAA, harvest losses if markets hiccup, coordinate with state taxes.

Delay this stuff and, yeah, you’ll probably spend the first years of retirement patching leaks. Do it now, and the market can be moody and rates can zig, your paycheck and your sleep won’t care.

Frequently Asked Questions

Q: Should I worry about rising insurance and shelter costs in 2025 blowing up my retirement budget?

A: Yeah, at least pay attention. Shelter was running roughly 5-6% year over year through mid‑2025 while headline inflation cooled near low‑3%. Homeowners premiums jumped about 20% in 2024 (Bankrate) and many carriers raised again this year, especially coastal/wildfire areas. Build a separate fixed-costs bucket, add a 10-15% cushion line for housing/insurance, and cut wants, not bills, when prices pop. Fast trims beat late panic.

Q: How do I separate fixed bills from lifestyle spending before I retire so I don’t torch cash in the first year?

A: Open two checking accounts now, while you’re still earning: (1) Fixed Bills and (2) Lifestyle. Route paychecks into Bills first. Auto‑pay housing, insurance (health, Part D/supplement), taxes (quarterly estimates), utilities, minimum debt. Add a 10% buffer for the “sticky” stuff, shelter and insurance are still pesky in 2025. Whatever remains sweeps weekly to Lifestyle for groceries, dining, gifts, travel. Track Lifestyle with a monthly cap (say, $X per week). If markets wobble or premiums jump, you only turn the Lifestyle dial. I botched this once, kept my city‑lunch habit during a semi‑retirement test; the card bill smacked me. Two buckets would’ve saved me a month of grumbling.

Q: What’s the difference between an emergency fund and a retirement “shock absorber” for bills?

A: Emergency fund = true surprises: roof leak, big dental, the transmission finally quits. Keep 6-12 months of fixed bills in high‑yield savings or T‑bills. Shock absorber = planned volatility: premium hikes, property tax reassessments, market dips. For that, set a 12-24 month “spend bridge” covering both fixed and a trimmed Lifestyle allowance, invested ultra‑short (HYSAs/3-12 month T‑bills). Use rules: if portfolio is down 10%+, pause discretionary travel and draw from the bridge; when markets recover, refill it. Different jobs: emergencies save you from debt; the shock absorber saves you from selling stocks at dumb times.

Q: Is it better to claim Social Security now and protect my portfolio cash flow, or delay and tighten lifestyle spending?

A: Short version: it depends on health, work flexibility, and how tight your fixed bills are versus guaranteed income. Longer version with numbers: claiming at 62 cuts your benefit ~25-30% versus full retirement age (depends on birth year). Delaying earns ~8% per year in deferral credits until 70. Breakeven for delaying from 67 to 70 is roughly age 80-81 for many people. If your fixed bills (housing, insurance, taxes, utilities, debt minimums) fit under guaranteed income, pension + Social Security, your portfolio only has to fund wants, which lowers sequence‑of‑returns risk. In 2025’s environment, shelter sticky at ~5-6% y/y mid‑year and homeowners premiums still jumping in many states, I like this rule of thumb:

• If withdrawing >4.5% from your portfolio to cover fixed bills, consider claiming earlier to reduce stress on assets.
• If you can cover fixed bills by trimming Lifestyle 10-20% and you’re in decent health with family longevity, delaying can be attractive.
• Watch taxes and Medicare IRMAA: a large Roth conversion window (before RMDs and before Social Security) can favor delaying benefits. Practical setup I use with clients: lock fixed bills with guaranteed income (benefits, annuity only if pricing is fair), keep a 12-24 month cash/T‑bill bridge for Lifestyle, and set a guardrail, if portfolio drops 15%, freeze travel and draw from the bridge. I’ve seen people sleep better claiming a year “early” because it plugs the rent and Medicare premiums. Peace of mind is worth a quarter‑point of theoretical return, no joke.

@article{how-to-budget-on-fixed-income-before-retirement,
    title   = {How to Budget on Fixed Income Before Retirement},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/budget-fixed-income-pre-retirement/}
}