Email question: Budgeting concerns of a retiree

Dear Pete,
I retired 6 months ago. I have always lived within my “means” but suddenly find that everything has changed & I wonder if I am now “living above my means.” Can you help me re-establish a livable monthly budget? I am a 65 year old divorced female, who received social security $1275/month and a pension of $609/month. I own a condo for which I paid $127,000 (cash). I have NO debts!  My vehicle still runs well & looks “good enough” for me. It has 136,000 miles & I am considering an upgrade.
My current budget includes:
Condo fee:             $395/mo
Medicare B             105/mo
Medicare D             21/mo
Medicare F              141/mo
landline/internet     66/mo
Gas                          69/mo
Electric                    70/mo
Insurance                 67/mo (auto, home, jewelry)
Tithe                        187/mo
property tax            92/mo
newspaper              7/mo
food                         200/mo
home maint.           100/mo
fun                           50/mo
clothes                     50/mo
yard                         10/mo
car repair                90/mo
medicine                 50/mo
cell phone               20/mo
My condo is beautiful but maybe it’s costing too much as reflected in the condo fees. I have top of the line Medicare plans (I think) but “F” is going up in April & June! I allowed $50/month for meds although I only take 3 generic meds for less than $30/month. This includes doctor/dentist visits & over the counter meds. I have a land line phone & only use my cell phone on a pay as I use basis. I receive the newspaper on Thursday & Sunday. I exercise for “free” at the local YMCA “Silver Sneakers” due to my Medicare F. I try to tithe one tenth on my gross pay.
I have $128,000 in stocks followed by a financial planner. I have a $13,000 annuity at 5.6 % due to mature in 2 years. My jewelry was appraised at $6,300. I currently have $20,000 in my checking account which includes “cash” for my next car. Am I doing it right? If so, why do I feel so poor? Can I spend more on “fun & entertainment”? Will I outlive my monies?
Thank you for your advise.
Sincerely,
Nancy 
Nancy,
Thanks for taking time to email me, and thanks for giving me so many details. It really does help me answer your questions more accurately. Here’s what I think.
Your total monthly expenses are about $100 less than your current monthly retirement income. This isn’t bad, but it isn’t great either. As consumer prices rise, this will become a problem.
It could be argued that your condo fee is the main culprit in your financial situation. Being without a mortgage is fantastic, but that monthly commitment of $395/month is deceptively troublesome. That condo fee is 21% of your retirement income. Very frankly, I think your retirement situation is pretty sweet, if that condo fee didn’t exist. My fear is that the condo fee will continue to rise over the years, as they often do.
Like many retirees, your medical expenses are pretty high, but it sounds like you secured “the best” type of coverage for a reason. The rest of your expenses are incredibly reasonable.
Once you’re sure that your budget is efficient and resourceful, then you can consider increasing your retirement income by creating an income stream off of your stocks and annuity. As I discuss in my book Mock Retirement, you can take distributions on your retirement assets (stocks and annuity), as long as you aren’t taking too high of a percentage. You never really should take more than 4% of your total portfolio per year. For you, that would be $5,640 or $470 monthly. In other words, if you want to have some more money for discretionary expenses, talk to your financial advisor about taking up to, but not over, $470/month out of your retirement investments. Have your advisor run a Monte Carlo simulation on your portfolio. This will determine the prudence of removing money from your investments, based on the type of investments you have. There are easy-to-understand Monte Carlo charts in Mock Retirementas well.
By only taking 4% or less, you reduce the risk of running out of money. I don’t need to say this, but running out of money is the worst possible thing that can happen. People often try to justify taking more than 4% off of their investments annually, but it’s a tremendous risk that I personally wouldn’t take.
Based on the information provided, I’m not worried about you running out of money, as long as a catastrophic financial event doesn’t occur. You discipline will serve you well. Don’t get too aggressive with your car purchase, because that $20,000 is your emergency fund. Once that money is spent, it’s gone and you would be without an emergency fund.

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