Retirement costs can add up fast.
Life is full of surprises.
Sometimes these can be expensive.
With a fixed income in retirement, unanticipated expenses can feel incredibly intimidating.
According to a recent Money Talks News article titled “11 Huge Retirement Costs That Are Often Overlooked,” awareness of common high cost expenses in retirement can help you better prepare for them.
What are these retirement costs?
In retirement, you will have to make Medicare premium payments as well as pay deductibles.
These costs often increase annually.
Many retirees also choose to purchase supplemental plans for their Medicare.
These are known as Medigap policies.
Although Medigap policies can provide coverage for what would be out-of-pocket expenses, the Medigap policy itself is not cheap.
Neither Medicare or Medigap polices cover long-term care costs.
Long-term care can quickly add up and deplete retirement savings.
As such it should be one of the retirement costs all seniors should include in their budgets.
To plan ahead for these expenses, individuals should purchase long-term care insurance when they are still relatively healthy.
According to a 2021 American Advisors Group survey, around 82 percent of seniors indicated they would prefer to age at home.
Although this is certainly the ideal, it is not always possible due to external factors.
Often homes need to be renovated to accommodate ailing mobility and to support independence.
These renovations can include adding a bedroom to the main floor, renovating the bathroom to make it more safe, or widening doorways to fit wheelchairs.
Especially with material costs being high like they are now (let alone the lack of skilled labor available to make the renovations), this can quickly break a budget.
Federal income taxes.
It would be nice to owe no taxes in retirement, yes?
Although this sounds lovely, it is not reality.
In general, income will decrease during retirement.
Unfortunately, this does not mean you will no longer pay taxes.
Certain circumstances may even require a tax on Social Security benefits.
State income taxes.
States are not uniform in how they treat income taxes in retirement.
Although not every state will tax Social Security, most will levy taxes on other retirement income.
These can include pensions or traditional IRAs.
Making car payments or even funding the necessary maintenance of an older vehicle can add up.
If you own the car, you will still have to pay for insurance and gasoline.
To reduce these expenses, you could sell one of your vehicles if you happen to have two cars.
If public transportation is available in your area, this can be a simple way to reduce retirement costs.
It can be challenging to travel when you are working full time.
This can be even more of a struggle if your spouse also works.
For these reasons, many seniors choose to spend some of their time in retirement traveling.
It costs money to buy tickets or fuel as well as pay for lodging.
If you plan to travel, you should incorporate this into your savings and your budget.
Needy adult children.
Sometimes adult children may return home or ask for financial assistance.
Others may request a co-signer for a loan and leave your with the responsibility to pay.
Although you are not obligated to assist your adult children financially, those who do may find this to be a hefty expense in retirement.
Some folks have children who grow up and other children who just continue to have more birthdays.
Chances are you like to have fun.
If you enjoy plays, musicals, or concerts; these experiences do not come cheap.
Households led by individuals age 65 or older spent an average of $302 for entertainment fees and admissions in 2020 alone.
Retirement costs will be significantly impacted by inflation.
As such, you will need to plan and prepare accordingly for decades to come.
A long life.
Because people are living longer, they will have to make their money last.
By preparing for retirement costs while you are working, you can set yourself up for a more comfortable and less stressful future.
I recommend having the advice of a financial advisor experienced in the issues of retirement planning.
Reference: Money Talks News (Dec. 14, 2021) “11 Huge Retirement Costs That Are Often Overlooked”