Variable expenses to account for in retirement
May 17, 2017
When planning for your retirement, it is smart to estimate your future monthly expenses. However, nailing this down may be easier said than done. You should take into account expenses that will change over time – both those that will increase and also those that will decrease. Doing so will ensure more accurate calculations on how much money you need for retirement.
Most people are actually surprised to learn that as they transition into retirement lifestyle expenses often rise. This is due to an increase in activities that now fill the time that used to be spent at work. An increase in travel also often adds to the increase in expenses. This spending tends to tail off as we slow down with age.
Paying for health care can be one of the largest expenses for people in retirement. While Medicare covers many health-related expenses in retirement, it only covers long-term care costs in limited circumstances. Long-term care is an increasingly important part of retirement planning, as a significant percentage of retirees likely need some level of care in their life.
This expense will depend completely upon your unique situation. Do you plan to stay in your home that is completely paid off? Do you plan to downsize? If so, your housing expense may just play a small role in your overall budget. Alternatively, spending on housing may increase if a retiree moves into specialized senior housing. It is better to plan ahead for possible changes in your housing situation towards the later years of your life rather than be caught off guard.
According to the Employee Benefit Research Institute, the difficulty of nailing down future expenses may be one reason why nearly half of workers haven’t attempted to calculate how much money they’ll need for retirement. However, attempting to calculate these costs and planning ahead is the best way to be as prepared as possible.
Texas Gulf Bank provides a free retirement plan calculator to help you. Our Wealth Management experts are also available to consult with you to aid in ensuring your retirement is as enjoyable and financially carefree as possible.
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