facebook twitter youtube google plus linkedin

Expenses in Retirement – What To Expect

Expenses in Retirement – What To Expect

By Susan Williams

Retirement – you’ve worked hard all your life and you’re getting ready to retire. It’s supposed to be the time of your life when you can just kick back and enjoy life.

But if you haven’t planned well for the financial side of your retirement, this can really have a big impact on how well you are able to actually enjoy your retirement.

To better understand what expenses we should plan for, I met with Gary Foreman, the Founder of Dollar Stretcher and publisher of a newsletter call After 50 Finances to better understand what expenses we should plan for in retirement.

Here is our discussion:

These are the highlights of what Gary had to share;

The Typical Expenses To Expect in Retirement

  • Expenses in retirement are not that different than before retirement. For most people they will spend 30 – 40% of their income on housing, 10 – 20% on food, 10 – 20% on transportation.
  • Leisure and travel activities expenses do tend to increase. For example, rather than strictly an annual vacation, they may visit their grandchildren two or three times a year or take the trip that they have always dreamed of

What Expenses Can Change in Retirement

  • Housing expenses can be where the most change can occur in retirement. The decision to stay in the same home (age-in-place), move to a 55 plus community or even sharing residences with other people can all impact how much money may be required. Some retirees are even starting to rent out some of their rooms in their homes that their children have since vacated creating a cash flow.
  • Transportation is also another cost that could change significantly. It can drop if you are no longer having to commute to work or pay for parking once you retire

Expenses in Retirement That Are Often Overlooked

  • It used to be quite common for people to plan for expenses in retirement as being 20 – 30% less than what they were before retirement. Gary suggests that it is a much better exercise to actually figure out your lifestyle and plans for retirement and how much this is going to actually cost rather than using a generalized number
  • Do not underestimate the costs for medical care in retirement. In the US, the average retiree is likely to spend $200K in uncovered medical care. There are often costs associated with healthcare that may not be covered – for example dental care or eye care. You should really understand what coverage you have and what you don’t have and ensure that you plan for these expenses
  • Long term care is another area that also needs to be considered as this can be quite expensive. Companies that offer in home support can add up quite quickly
  • Home repairs. Should you decide to age-in-place the home repairs or renovation that you may be used to doing you may no longer be able to do yourself and you may need to hire some help. You need to plan for this as this can be expensive

How To Plan For Your Expenses

  • Approach your planning in an organized way. Even though no one likes a budget – it is the best way to track your spending.
  • In the year before retiring, track what you are spending so you know how much it actually is. Also consider what you expect your lifestyle to be in retirement and project how much this is going to cost
  • Also consider whether there will be any additional form of income coming in (for example home business)
  • As well consider how you will be spending. It may not be a constant every year. For example, do you anticipate doing more travelling at the beginning of your retirement? Will your care needs increase towards the end of your retirement?
  • Be sure to build in some flexibility and a cushion a little larger than your expenses so that you could manage and cope with any bumps along the way

So hopefully with a little work and planning upfront you will be able to enjoy the retirement you’ve always dreamed of!

Other Related Posts;

The following two tabs change content below.
mm
Susan Williams is the Founder of Booming Encore. Being a Boomer herself, Susan loves to discover and share ways to live life to the fullest. She shares her experiences, observations and opinions on living life after 50 and tries to embrace Booming Encore's philosophy of making sure every day matters.