Many folks nearing retirement fail to fully appreciate just how expensive retirement can be. Have you sat down and considered the expenses you’re likely to face in retirement?
Whether your vision of retirement includes traveling the world in first-class or staying at home with the grandkids, there are likely to be expenses that you either failed to consider or drastically underestimated.
It’s important to accurately estimate your expenses in order to fully enjoy your retirement. The main challenge in retirement is that you’ll be on a fixed income. You also may not be able to borrow money at some point.
Consider these costs:
Recreation
One error many retirees make is assuming their recreational or entertainment expenses will stay the same. In most cases, they will not. Consider that while you’re working, work takes up the largest part of your day. It likely accounts for around 10 hours of your day if you include your commute and getting ready for work.
You’ll probably want to spend all of that newfound freedom doing something other than watching TV. Traveling, going out to eat, playing golf, and shopping cost a lot more than going to work. Consider that you’ll be replacing 10 hours of income-producing activity with activities that will likely cost some money.
Basic Living Expenses
Hopefully, you’ll have successfully eliminated your biggest housing expense by paying off your mortgage. But you’ll still have to pay property taxes, and they’re unlikely to decrease over time. If you’re renting, well…you rent won’t go down, even if you downsize.
The same goes for every other basic expenses. You’ll still need to buy clothes and shoes from time to time. You’ll still need personal care.
Major Expenses
You may need to buy a car in your retirement. If you’re a homeowner, your home may need a new roof. You’ll need to plan and save for these.
Healthcare Expenses
Ultimately, this is the biggest expense for many retirees. Dental and eyecare cost can really add up. My parents recently needed dental care. Although they’re both insured, they still had to fork $ 2 000.00 of their own money, for total costs of $ 4 000.00.
Seventy percent of the population over the age of 65 will require long-term care at some point. Depending on the option you choose, this can be very expensive.
- Assisted living facilities average approximately $3,500 per month.
- A private nursing home is approximately $8,000 per month.
- In-home care is roughly $50 hour for a certified home health aide.
Unexpected Expenses
A major automobile repair just after the warranty expired or one of the children needing money can throw a wrench in your finances. Having an emergency fund is a good idea, regardless of your stage in life. You’ll need some cash reserves.
Final Word
It can be challenging to plan for retirement. Both your income and your expenses are changing. While it’s not possible to foresee every expense, many expenses can be anticipated.
Begin planning for your retirement today. Carefully consider the lifestyle you’d like to live and the expenses necessary to support that lifestyle.
The Money Savvy Blog 