What To Do When Expenses Exceed Income
 So you have totaled up what you will collect from Social Security plus the income you can extract from your investments without eating into principal, compared it against your expense budget, adjusted for changes due to retirement, and you have come up short. Don't panic! There are alternatives to consider.
But before we get to those alternatives, it may be of some comfort to keep in mind that you are not alone.
Now let's get back to alternative ways to close the gap between income and expense. There are basically two approaches: either find a way to earn some income, or gradually eat into your assets. The first approach is generally superior, and it is of such great interest that here on the BBRC website there is a whole section devoted to it: Business and Income Opportunities. The section covers options like buying a franchise or starting your own business from scratch--which are fulltime business commitments--as well as less ambitious options like finding part-time work or getting paid by a non-profit for what used to be volunteer work. So we urge you to check out that section. Keep in mind also that working in retirement has no stigma associated with it, and can be challenging and rewarding. In fact, in the section on the BBRC website on how to Spend and Enjoy Your Time, you will learn that loafing is not compatible with longevity and that it's important for your physical and mental health to pursue challenging activities.
The reality is, however, that many retirees don't want to work, some cannot find work, or some cannot earn enough from their work. So they are dipping into their assets. Many of us baby boomers have parents in this predicament, and many of us baby boomers ourselves will soon have the same predicament.
If you or your parents face this situation, there are some questions to ask. First, how many years will the assets last before they are totally consumed? You have to take into account investment returns and inflation rates to answer this question: the unconsumed assets will be earning an investment return but your expenses will be increasing with inflation. It would probably make sense to work with a certified financial planner to help you make these calculations. CFP's not only have the financial acumen required, they will also be objective and realistic. If you are lucky, it may turn out that at the current "burn rate" your assets will last until you are well into your 90s. Whatever the answer, you must then ask: What is the likelihood that you and your spouse reaching that age?
For the sake of argument, let's take the worse case scenario: that you are clearly going to run out of money before you are likely to die. This is in fact the unpleasant situation facing the parents of many baby boomers. Your action plan must include consulting with the family and friends who are likely going to step in and help support you--usually children. It takes time for children to digest the reality that in their final years their parents may be living under their roof so it's best to broach the problem sooner rather than later. Sometimes alterations to a house are in order--to create a "mother-in-law" suite with a separate bath and even kitchen area, for example. And often it's best to make the transition long before the money runs out. A parent's moving into the home of one of their children should reduce expenses, and allow remaining assets to last longer, preserving the parent's sense of independence.
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