Editors' pick: Originally published Oct. 27.
There are few tasks in life that Americans avoid as much as they do a household budget.
According to Gallup's economy and personal finance survey, only one-third of Americans keep a detailed written or computerized monthly budget. People were more likely to have a plan if they had a college degree (38%) or if they made more than $75,000 a year (43%).
Financial planners say a budget is important, but in retirement, when people are living on fixed income for the rest of their lives, it is critical. For one thing, people are living longer and many are in real danger of running out of money in retirement.
"When we're putting together retirement plans, we need our clients to have a good idea of what their retirement vision will look like," says Jennifer Landon, founder and president of Journey Financial Services in Idaho Falls, Idaho. "Because, if we have someone who believes they will be O.K. on $60,000 a year, and we build a retirement plan around that, then they retire and find out they can't live on $60,000, but need $80,000, it would put a lot of strain on that retirement."
"Basing (the retirement plan) on inaccurate information could put them in a situation where they could run out of money quickly," she adds.
Landon says the industry sometimes uses a rule of thumb to get an idea of what retirees need to live - 80% of pre-retirement income. But, she says, that is not always the case.