Blog · July 17, 2025 · 4 min read

Creating a Retirement Budget That Actually Works

By Seth Deal, CPA/PFS

Picture this: You're five years from retirement, sitting at your desk at the Department of Transportation, and your colleague mentions they're worried about making ends meet in retirement. Sound familiar? As a Washington State public employee, you have some unique advantages through the Department of Retirement Systems (DRS), but creating a budget that actually works requires more than just knowing your pension amount. Whether you're part of PERS, LEOFF, TRS, or another DRS plan, the key to retirement security lies in building a realistic, comprehensive budget that accounts for your specific situation.

Core Principles for Washington State Public Employee Retirement Budgeting

Before diving into strategy, understand these fundamental principles:

1. The 4% Rule Needs Adjustments The traditional 4% withdrawal rule may not apply perfectly to your situation since you'll have pension income covering a significant portion of your expenses.¹

2. Healthcare Costs Require Special Planning Washington State employees have access to continued health benefits in retirement, but premiums and out-of-pocket costs will likely increase significantly.²

3. Your Pension is Your Foundation Unlike private sector workers, your DRS pension provides a guaranteed income stream that should form the base of your retirement budget.³

Your 5-Step Strategy for Building a Retirement Budget That Works

Step 1: Calculate Your Guaranteed Foundation Income

Start with what you know for certain. Log into your DRS account and find your projected monthly pension benefit. This becomes your budget's cornerstone.

Key actions for this step:

Request your official pension estimate from DRS (within 3 months of retirement)
Create your Social Security account at ssa.gov for benefit projections
Consider timing strategies for both benefits

Step 2: Project Your Real Living Expenses

Many retirement budgets fail because they underestimate actual costs. Research shows retirees typically need 70-90% of their pre-retirement income, but this varies significantly.⁶

Washington State Considerations:

Property taxes continue to rise in many counties
Healthcare premiums for retirees generally increase each year
No state income tax means more of your retirement income stays in your pocket

Create three expense categories:

Essential expenses: Housing, utilities, food, healthcare, insurance
Important expenses: Transportation, home maintenance, personal care
Discretionary expenses: Travel, hobbies, dining out, gifts

Step 3: Bridge the Gap with Personal Savings

Calculate the difference between your guaranteed income and projected expenses. This gap must be filled by your personal retirement savings.

The Math: Monthly expense goal: $3,780 Guaranteed income: $3,425 Monthly gap: $355 Annual gap: $4,260

Important considerations:

Sequence of returns risk in early retirement years
Tax efficiency of withdrawal strategies
Emergency fund separate from regular retirement funds

Step 4: Plan for Healthcare and Long-Term Care

Healthcare represents the biggest wildcard in retirement budgeting. Washington State employees have advantages, but costs still rise significantly.

Current Reality: The average 65-year-old couple will spend $300,000 on healthcare throughout retirement.⁷ However, as a Washington State employee, you can continue your health benefits with some employer contribution continuing.

Strategic Approach:

Budget for healthcare costs
Consider a Health Savings Account if eligible
Research long-term care insurance options
Understand your specific plan's retiree health benefit structure

Step 5: Build in Flexibility and Regular Reviews

Static budgets fail. Build in mechanisms for adjustment and regular review.

Flexibility Strategies:

Maintain 6-12 months of expenses in accessible savings
Create "tiers" of expenses you can adjust if needed
Plan for major one-time expenses (roof replacement, car purchases)
Review and adjust annually based on actual spending patterns

Your Action Plan

Take these specific steps within the next 30 days:

Review your DRS pension estimate and create your Social Security account
Track your current spending for one month to understand real expenses
Calculate your projected retirement income gap using the worksheet method above
Research your health benefit options for retirement through your HR department

Remember, this budget is your starting point, not your final answer. Regular reviews and adjustments will keep your retirement budget working effectively throughout your retirement years.

I specialize in helping Washington public employees nearing or in retirement reduce taxes, maximize their pensions, create reliable income, and achieve financial independence.

Get a free financial review where we'll answer your key questions and show you exactly how we can help you make the best decisions for your retirement. Click below to schedule your free financial review:

No sales pressure. No obligations. Just professional guidance to help you make the best decision for your financial future.

-Seth Deal

Sources and Resources