Budgeting to Retire

By David Chazin

The old adage “out of sight, out of mind” is never truer than when it comes to budgeting for retirement. For Chevron employees, starting early is the best strategy. But typically, unless you are looking to retire in the next few years, nothing is further from a Chevron employee’s mind, especially for those newer to the company.

That’s probably the biggest mistake most people make when it comes to retirement planning, experts say. While it’s hard to give much thought to something that’s 10 to 20 years away, developing a budget geared toward retirement is the best way to help make sure you’ll have the kind of retirement that you want.

Textbooks may tell you that once you retire, your living expenses will drop by 20 to 25 percent. The rationale is that children will be out of the nest, you won’t have expenses associated with working and so on. But that may no longer be the case.

People are simply more active now. They want to take vacations, have a second home or pursue hobbies they didn’t have time for when they were working at Chevron. Many former employees even get involved in the Chevron Retiree Association. In some ways it’s a good problem to have, but they have to plan that their current living expenses will remain constant throughout their lives.

At first, that may sound like a tall order. The average American today may have nowhere near the retirement savings needed to make that happen. But by budgeting properly, reaching your retirement goals can be easier than you think. The key is to start planning early.

While there is no one set scenario, here are some general rules of thumb for calculating your retirement nest egg. First, to avoid exhausting your assets, you should withdraw no more than four or five percent a year, adjusted for inflation, from your portfolio. That means you’ll need $20 to $25 in assets for every dollar you want to spend in retirement. So, to generate $50,000 in retirement income, count on having $1 million to $1.25 million in your nest egg.

Social Security benefits can cover some of that amount, but it may not be wise to anticipate Social Security benefits. It would be better to consider it a cushion, not necessarily a requirement of retirement.

For many Chevron employees, then, the question becomes how to get from here to there. Again, it’s not as hard as it seems, especially if you start today. Even for someone age 25, for example, saving even 3 percent of your total pre-tax salary a year can help accumulate a sizeable nest egg by age 65, since time is on your side. But for older employees, the annual savings rate needed to accumulate a sizeable nest egg by age 65 increases dramatically – 18 percent at age 45 and up to 28 percent of pre-tax income at age 50, according to some experts, since there is less time to accumulate savings till retirement.

For those at Chevron who are closer to retirement, it is possible to catch up. But you may have to sacrifice some of your current lifestyle. And budgeting becomes even more important.

You should start by identifying your core or fixed expenses, such as mortgage payments, utility bills, insurance, etc. Basically, it’s the money you must spend every month to maintain a household. Expenditures beyond that can be considered discretionary expenses.

Most Chevron employees have a good understanding of their core expenses and their discretionary expenses. But it’s really a challenge for many people to put pen to paper and figure out how much they spend on fixed expenses and what are discretionary activities.

After you identify your core or fixed expenses, then add in the discretionary expenses; the cost of going to the movies, dinners, magazine subscriptions, etc. You’ll see that they quickly add up.

Once that’s accomplished, the next step is to save and invest your money wisely. A diversified portfolio of stocks may still be the appropriate investment, depending on your time horizon and risk tolerance. It’s a good idea to have money directly deposited into a separate account, so you don’t feel the savings. If the money isn’t in your pocket to begin with, it doesn’t hurt as much to have it go somewhere else. This is essentially what happens with your 401(k) contributions.

The idea is to learn how to begin a saving regimen. When you see your money build up, it motivates you to get – and stay – in the habit of saving. Some Chevron employees are now benefiting from years of putting this into practice.


I'd be happy to sit down with you to discuss how to help plan for retirement and implement a strategy for investments and savings to help you down the road. Because I work with many Chevron executives, managers, employees and retirees, I'm very knowledgeable about your various compensation plans and benefit offerings, plus other issues specific to Chevron employees (in addition to the retirement, investment, and estate planning issues everybody faces). In fact, chances are you may know one of my Chevron clients and you can ask them how working with an advisor has helped them.

Please contact me at (925) 659-0251 with specific questions or to schedule a time to meet in either my San Ramon or Point Richmond office. Or for more information, please visit our website at www.insight2wealth.com.


David Chazin, Insight Wealth Strategies and Lincoln Financial Advisors Corp are not affiliated with Chevron.