11 biggest expenses that will hit you harder after retirement

Estimating your likely expenses when you retire is the first step you should take as you approach retirement. You certainly don’t want to throw money away, but there may be some costs that you forget.

Sure, you’ll want to add expenses for travel or hobbies if you plan to pursue those things when you retire, but what about everyday expenses? There are plenty of these you could skip when trying to estimate your retirement expenses.

So, before you start calculating how much money you’ll need for retirement, here are some expenses you mustn’t forget.

6 ways to supplement Social Security in 2023

1. Housing

Housing can be a big expense to consider, regardless of where you decide to live in retirement. Perhaps you want to live in a condominium or a senior living community.

These municipalities may incur additional costs on top of your mortgage, such as: B. A fee for the homeowners association. You should also consider the higher costs of things like assisted living or a nursing home.

Keep in mind that costs can increase depending on the type of accommodation and care you require. So consider possible increases as you get older.

2. Property Taxes

You may have a goal of paying off your house by the time you retire, but property taxes stay with you. Make sure you know how much your annual property taxes will cost, and remember that they’re likely to increase in the years to come, depending on the appraised value of your home.

If you have a mortgage, chances are you already have an escrow account to set aside property taxes each month.

If you don’t have an escrow account, it may be easier to put a little into a savings account each month than pay it out when a large property tax bill comes due.

Would you like to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.

3. Insurance

Your estimated budget should include many types of insurance. You may need home and car insurance, as well as life insurance. And if you’re concerned about the need for additional health insurance, you might want to consider long-term care insurance.

You may also want to change a policy as your circumstances change. Seniors may be wasting money on insurance coverage that hasn’t been customized for specific lifestyle changes.

4. Utilities

Utilities are another cost of accommodation that you cannot ignore when creating your budget. Think of all the bills you pay to keep your house running, including gas, electricity, and water.

You should also consider cable or internet costs if you plan to spend your retirement years catching up on shows or reaching out to friends and family.

5. Healthcare

You may be surprised that Medicare doesn’t cover all of your medical expenses. Medicare Part B (health insurance) may have a monthly premium and an annual deductible.

You may also want to purchase supplemental insurance or a Medigap plan. And Medicare Part D, a prescription drug plan, can also incur additional costs.

Pro Tip: As you approach retirement age it may also be a good idea to invest in long term care insurance which could cover medical care in old age as well as a nursing home or other specialized care.

6. Food

Grocery could be a significant expense for a steady income, but there are ways to save money on groceries if you’re worried about fitting this expense into your budget. Now you might want to make a habit of clipping coupons or saving money at a warehouse retailer like Costco.

You should also factor in extra expenses for dining out, especially if you’re a foodie who might want to visit more upscale restaurants when you have more time to do so during your retirement.

7. Travel

Travel is on many people’s bucket list when deciding to retire, but it may not come cheap. You may want to travel internationally, which costs more than domestic travel. Or maybe you want to stay in more upmarket accommodations and spend extra money to really enjoy your visits.

Travel costs can add up quickly, so remember to factor in potential expenses and revise your estimates as necessary.

Pro Tip: If you’re looking forward to driving in retirement, there are ways to save on gas you should know before you head out.

8. Transportation

Retirement can bring additional opportunities to go out and do things or travel. You may need to add an auto payment and insurance to your budget as part of your retirement expenses.

And consider additional funds for things like Uber, Lyft, or other transportation if you need someone to drive you somewhere.

9. Emergencies

It’s good to have an emergency fund when you’re retired, like you have one now. An emergency fund can cover unexpected expenses like home repairs, medical bills, or repairs to your car.

You may also want to set aside extra money for your retirement emergency fund since you don’t have income from a job to top up money you need to withdraw.

10. Debt

You may have credit card debt, a mortgage, or a car payment. You may also have a loan that you took out with a bank or financial institution for any number of items.

That debt doesn’t go away just because you retire. So include your monthly payments for these additional costs as part of your retirement budget.

6 clever ways to smash your debt today

11. Retirement Investment Taxes

Some investments such as B. a Roth IRA are not taxed if you retire from them after you retire. But other retirement investments, such as Items such as a 401(k) or traditional IRA may be taxed if you are willing to take out the funds for use during your retirement years.

It’s a good idea to consult a financial planner or accountant who specializes in retirement taxes to assess how much you may owe and how it may affect your past savings.

And don’t forget the Minimum Required Distribution (RMD). At age 72, retirees must begin collecting a portion of their retirement savings and paying taxes each year. You can download an IRA worksheet for the minimum distribution required from the IRS website.

bottom line

You may not be surprised by spending in your later years if you start planning your retirement budget now. Include everyday expenses and paying off debt like a home loan or car loan.

Remember to plan for one-time events like a trip to Europe or a cruise to Alaska. And make sure you have money saved for unexpected expenses that may arise as you age.

More from FinanceBuzz:

This article The 11 Biggest Expenses That Will Hit You Harder After Retirement originally appeared on FinanceBuzz.

Leave a Comment