Test-Drive Your Retirement Budget: A Guide for Washington State Employees

Are you making the most of your retirement planning? As a Washington State public employee approaching retirement, understanding how to test-drive your future budget could save you from financial surprises. Many don't realize the full range of strategies available to ensure their retirement income will truly support their desired lifestyle.
Core Principles for Test-Driving Your Retirement BudgetTest-driving your retirement budget represents a valuable planning strategy that deserves careful consideration. For Washington State employees, several key principles should guide your approach:
1.        Reality often differs from expectations: Studies show 46% of retirees spend more than expected in early retirement¹
2.        Your fixed pension creates unique opportunities: Your DRS pension provides predictable income that needs careful coordination with other resources²
3.        State-specific factors matter: Washington's tax structure and benefit systems create distinct planning considerations³
4.        Emotional and lifestyle changes affect spending: Your daily habits will change, often leading to unexpected spending patterns
Your 5-Step Strategy for Test-Driving Your Retirement BudgetStep 1: Calculate Your Expected Retirement Income·       Your DRS Pension: Use the DRS benefit estimator tool for your specific plan²
·       Social Security: With the recent repeal of the Windfall Elimination Provision, Washington State employees now receive full benefits⁴
·       Personal Savings: Calculate safe investment withdrawal rates
·       Other Income: Include rental properties, part-time work, or other income sources
Step 2: Track Your Current Spending·       Track every expense for 2-3 months using a spreadsheet or budgeting app
·       Categorize spending and calculate monthly averages
·       Pay attention to work-related expenses that will disappear in retirement
Step 3: Adjust Your Budget for Retirement Reality·       Eliminate work-related expenses: Commuting, professional clothing, workplace lunches
·       Adjust for new expenses: Higher healthcare costs, new hobbies, travel
·       Consider Washington-specific factors: Healthcare costs through PEBB, property tax exemptions for seniors³
Remember that while you'll no longer contribute to your pension, you may have higher healthcare premiums if you retire before Medicare eligibility.
Step 4: Live on Your Retirement Budget for 3-6 Months·       Set up a separate account with your estimated retirement income
·       Live exclusively on this account for the test period
·       Track any challenges or shortfalls you experience
For DRS members, this step is crucial because your pension provides fixed income that won't easily adjust to unexpected spending needs.
Step 5: Refine and Repeat·       Analyze where you struggled or had surpluses
·       Adjust your retirement income plans if needed
·       Consider working longer or adjusting your lifestyle
Alternative Approaches to Test-Driving Your Retirement BudgetFor those who can't commit to a full test, consider these alternatives:
The Partial Practice ApproachFocus on specific categories where retirement will bring the biggest changes, like redirecting commuting costs to your retirement activities fund.
The Step-Down ApproachGradually reduce your spending over 1-2 years before retirement, reducing spending by 10% every three months until you reach your retirement budget level.
The Category Replacement MethodEach month, replace one budget category with its retirement equivalent—particularly useful for testing property tax impacts with Washington's senior exemption programs.³
The 80% Rule with AdjustmentsStart by testing a budget at 80% of your current income, then refine based on your specific situation.
Case Study: A Washington DRS Employee Tests the WatersMeet James, a 58-year-old IT specialist with the State Department of Revenue with 22 years in PERS Plan 2. His expected retirement income:
·       PERS Plan 2 pension (total): $3,000/month
·       Social Security: $2,100/month
·       Personal savings: $700/month
·       Total: $5,800/month
For three months, James lived on $5,800 monthly while banking the difference. This real-world test revealed important insights:
·       His commuting costs disappeared
·       Healthcare costs would increase until Medicare eligibility
·       He spent more monthly on hobbies than anticipated
·       Utility bills were higher because he was home more often
These discoveries allowed James to make strategic adjustments before retirement:
·       Increasing his DCP contributions
·       Planning to work an extra year to increase benefits
·       Researching senior property tax exemptions in Washington³
·       Finding free recreational activities through state senior programs
Your Action Plan for Test-Driving Your Retirement Budget1.        Calculate your expected retirement income: Use the DRS benefit estimator and Social Security calculator²
2.        Track current expenses: Document all spending for 2-3 months
3.        Develop your retirement budget: Create your projected retirement spending plan
4.        Choose your test-drive approach: Select the method that best fits your timeline
5.        Execute your test and analyze results: Follow through and make necessary adjustments
Remember that these decisions are highly personal. Your health, financial situation, retirement goals, and family circumstances all play important roles in determining the best approach for you.
Sources and Resources1.        Employee Benefit Research Institute, "Retirement Confidence Survey"
2.        Washington State Department of Retirement Systems
3.        Washington State Department of Revenue, "Property Tax Exemptions"
4.        Social Security Administration, "Social Security Fairness Act"
5.        Health Care Authority, "PEBB Retiree Benefits"

-Seth Deal