By Gregg Gonzalez, CFP®
At RetireStrong Financial Advisors, we believe the strongest retirement plans are built on simple, effective habits practiced over time. One budgeting framework that has stood the test of time is the 50/30/20 rule – a straightforward way to balance spending, saving, and preparing for your future.
What Is the 50/30/20 Rule?
The 50/30/20 rule divides your after-tax income into three categories:
- 50% for Needs – Essential expenses like housing, utilities, groceries, transportation, insurance, and healthcare. These are your financial roots, providing stability.
- 30% for Wants – Lifestyle choices such as dining out, vacations, hobbies, and entertainment. These are the branches that add enjoyment and variety to life.
- 20% for Savings & Debt Repayment – Contributions to retirement accounts, emergency funds, investments, and paying down debt. These are your seeds, ensuring your financial forest continues to grow strong.
Why It Works
The 50/30/20 rule offers clarity and flexibility. It gives you a framework for making decisions without feeling restricted. By allocating a portion to wants, you enjoy life now. By dedicating a portion to savings and debt repayment, you ensure strength for the future.
Applying the Rule in Retirement
In retirement, your income sources may change, but the principle still applies. The percentages might shift, but balancing essentials, lifestyle choices, and savings for longevity is still key. For example:
- Ensure your fixed income covers at least 50% of essential needs.
- Allow for discretionary spending that makes retirement fulfilling.
- Continue saving or setting aside funds for healthcare and unexpected expenses.
The RetireStrong Approach
At RetireStrong, we see the 50/30/20 rule as a healthy starting point, not a rigid formula. Your unique lifestyle, goals, and retirement vision guide how we adapt this framework for you. Just as the deer in our logo symbolizes foresight and resilience, your budget should keep you steady while allowing freedom to explore and enjoy each season of life.
👉 At RetireStrong Financial Advisors, we help clients create customized budgeting strategies (whether using the 50/30/20 rule or other tailored approaches) to ensure your retirement forest grows strong and supports the life you’ve worked so hard to build.
This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk including the loss of principal. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
