diff --git a/app/models/retainer_deliverable.rb b/app/models/retainer_deliverable.rb
index 09b38b0..5b330ee 100644
--- a/app/models/retainer_deliverable.rb
+++ b/app/models/retainer_deliverable.rb
@@ -15,6 +15,7 @@ class RetainerDeliverable < HourlyDeliverable
 
   # Callbacks
   before_update :check_for_extended_period
+  before_update :check_for_shrunk_period
   
   def short_type
     'R'
@@ -95,12 +96,44 @@ class RetainerDeliverable < HourlyDeliverable
     end
   end
 
+  def check_for_shrunk_period
+    if end_date_changed? || start_date_changed?
+      shrink_budgets_to_new_period
+    end
+  end
+
   def self.frequencies_to_select
     ValidFrequencies.collect {|f| [l("text_#{f}"), f]}
   end
 
   private
 
+  def shrink_budgets_to_new_period
+    labor_budgets.all.each do |labor_budget|
+      # Purge un-dated budgets, should not be saved at all
+      labor_budget.destroy unless labor_budget.year.present?
+      labor_budget.destroy unless labor_budget.month.present?
+
+      # Purge budgets outside the new beginning/ending range
+      unless (beginning_date..ending_date).to_a.include?(Date.new(labor_budget.year, labor_budget.month, 1))
+        labor_budget.destroy
+      end
+    end
+
+    overhead_budgets.all.each do |overhead_budget|
+      # Purge un-dated budgets, should not be saved at all
+      overhead_budget.destroy unless overhead_budget.year.present?
+      overhead_budget.destroy unless overhead_budget.month.present?
+
+      # Purge budgets outside the new beginning/ending range
+      unless (beginning_date..ending_date).to_a.include?(Date.new(overhead_budget.year, overhead_budget.month, 1))
+        overhead_budget.destroy
+      end
+    end
+
+    true
+  end
+
   def extend_period_to_new_end_date
     old_end_date = end_date_change[0]
     last_labor_budgets = labor_budgets.all(:conditions => {:year => old_end_date.year, :month => old_end_date.month})
diff --git a/test/integration/deliverables_edit_test.rb b/test/integration/deliverables_edit_test.rb
index 96f915f..9ec87e6 100644
--- a/test/integration/deliverables_edit_test.rb
+++ b/test/integration/deliverables_edit_test.rb
@@ -257,4 +257,41 @@ class DeliverablesEditTest < ActionController::IntegrationTest
     end
 
   end
+
+  should "allow shrinking a Retainer's start and end months" do
+    @retainer_deliverable = RetainerDeliverable.spawn(:contract => @contract, :manager => @manager, :title => "Retainer")
+    @retainer_deliverable.labor_budgets << @labor_budget = LaborBudget.spawn(:deliverable => @retainer_deliverable, :budget => 1000, :hours => 10)
+    @retainer_deliverable.labor_budgets << @labor_budget = LaborBudget.spawn(:deliverable => @retainer_deliverable, :budget => 2000, :hours => 20)
+    @retainer_deliverable.overhead_budgets << @overhead_budget = OverheadBudget.spawn(:deliverable => @retainer_deliverable, :budget => 1000, :hours => 10)
+    @retainer_deliverable.overhead_budgets << @overhead_budget = OverheadBudget.spawn(:deliverable => @retainer_deliverable, :budget => 2000, :hours => 20)
+    @retainer_deliverable.start_date = '2010-01-01'
+    @retainer_deliverable.end_date = '2010-12-31'
+    @retainer_deliverable.save!
+    assert_equal 12, @retainer_deliverable.months.length
+    assert_equal 24, @retainer_deliverable.reload.labor_budgets.count # 12 months * 2 records
+    assert_equal 24, @retainer_deliverable.reload.overhead_budgets.count # 12 months * 2 records
+
+    visit_contract_page(@contract)
+    click_link_within "#deliverable_details_#{@retainer_deliverable.id}", 'Edit'
+    assert_response :success
+    assert_template 'deliverables/edit'
+
+    # Shrink the period to only 6 months
+    fill_in "Start", :with => '2010-02-13'
+    fill_in "End Date", :with => '2010-07-01'
+    click_button "Save"
+    assert_response :success
+    assert_template 'contracts/show'
+
+    @retainer_deliverable.reload
+    
+    assert_equal 6, @retainer_deliverable.months.length
+
+    @labor_budgets = @retainer_deliverable.reload.labor_budgets
+    assert_equal 12, @labor_budgets.length # 6 months * 2 records
+
+    @overhead_budgets = @retainer_deliverable.reload.overhead_budgets
+    assert_equal 12, @overhead_budgets.length # 6 months * 2 records
+
+  end
 end