Many people nearing retirement fail to fully appreciate just how expensive retirement can be. Have you really 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.
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 driving and getting ready for work.
- You probably will not want to spend all of that newfound freedom watching TV. Activities such as traveling, going out to eat, playing golf, and shopping cost a lot more than going to work. Consider that you’re replacing 10 hours of income-producing activity with activities that likely cost money.
- Cable, internet, utilities, property taxes, and other basic living expenses. Hopefully, you’ll have successfully eliminated your housing expense by paying off your mortgage. But you’ll still have to pay property taxes, and they’re unlikely to decrease over time. The same goes for the other monthly expenses you likely incur.
- Your utility bills are almost certainly going to increase as time goes on. It’s important to take factors such as this into consideration when making your retirement plans.
- The cost of food is also likely increase over time.
- The same goes for most, if not all, types of insurance.
- Health care expenses. Ultimately, this is the biggest expense for many retirees. The average total cost of medical care right now for a 65-year old couple is over $220,000. 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.
- Miscellaneous expenses. You never know what new interests you might develop. Maybe golf never sounded interesting, but you developed friendships with those that love to play. Perhaps you’ll develop a love of art and would like to start collecting.
- Assume you’ll find new hobbies and interests and try to plan accordingly.
- 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 important, regardless of your stage in life.
Planning for retirement can be challenging. Both your income and your expenses are changing. While it’s not possible to foresee every expense, many expenses can be anticipated. You have more free time. You’re going to want to fill that time with interesting and meaningful activities.
Begin planning for your retirement today. Carefully consider the lifestyle you’d like to live and the expenses necessary to support that lifestyle.