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Retirement Costs You Should Consider Now

Retirement Costs You Should Consider Now

| August 20, 2023

Even if you’re quite a few years away from your eventual retirement, it’s never too early to start planning for that phase of your life. In fact, it’s important to do so as soon as you think of it.

Most retired persons spend less annually than the general population does. The U.S. Bureau of Labor says the average retiree spent just over $52,000 in 2021, around 22% less than the general population. Every dollar in a retirement budget weighs a little more than it did in working times.

From a younger person’s perspective, retirement is still a long way off and somewhat mysterious. Even if your own parents or older friends are retired, it’s not always easy to know what they spend the most on. But it’s important to set priorities, even for the distant future.

When you start thinking about retirement, these are the expenses that you should consider first.

Housing

By far, housing takes up the most room in a retiree’s budget. The average retiree spends around 17% to 20% of their annual cash on housing. These expenses include mortgage or rent payments, insurance premiums, property taxes, and general upkeep.

It’s best — though by no means common — to have one’s home mortgage paid in full before retirement. This will, at least, free up more cash for other living expenses. It will also ease one of the biggest anxieties retirees can face.

Think about what retirement housing option is best for you. Do you want to spend your golden years in your familiar surroundings? Or would you prefer a streamlined residence in a managed facility? Consider both your preferences and what you’ll likely be able to afford.

Healthcare

Health concerns obviously become more significant the older one gets. There are more doctor visits and a higher chance of emergencies. There are also more meds, mobility devices, and accessibility concerns to budget for.

In most cases, the medical expense that takes up the most budget is insurance. You can start getting a handle on it by looking into Medicare. There are several structures and plans in Medicare that cover different situations. It’s a great idea to learn about the different Medicare provisions well before retirement.

You may also want to anticipate what long-term assistive care you may need in retirement. This is especially true if you’re currently being treated for certain medical conditions. 

Transportation

Retirees drive far less than they did when they were working. But a retiree’s transportation expenses don’t necessarily decline. If you do keep your car after you retire, you’ll still be on the hook for insurance, repairs, gas, and outstanding payments, if any.

Of course, retirees also tend to travel outside their homes more freely. This makes it important to think about airfare, car rentals, and public transit as part of your travel and accommodations budgets.

Interestingly, transportation is one of the retirement expenses that’s most neglected. That’s probably because we don’t think about it much unless something goes wrong. But transportation will definitely become an important consideration as you get older.

Food

What you eat in retirement will play a surprisingly big part in your finances. It’s pretty likely you’ll eat out more in old age. Some experts say eating out accounts for a high portion of retirement budgets, often within the 35% to 40% range.

You might well be eating new foods that you don’t eat now, whether for health or diet reasons. Many older people choose to become more restrictive in their food lifestyles. Whatever the case, your nutrition is an expense to think about now.

Utilities

Electricity, gas, heating, air conditioning, phone, and internet costs don’t disappear once you retire. Retirees spend nearly as much on utilities as non-retired people do. Some utilities, like those related to accessibility, are specific to retirement.

Although your utility profile may change when you retire, it may be less of a change than other aspects. Still, utilities are worth taking into account now. Anticipate what utilities you may need when you’re older.

Get Expert Retirement Planning with Good Life Financial Advisors

No matter how near or far you are from retirement, Good Life in Morehead City can help you plan for it. Our experts have helped older clients get their finances in order for a happy, comfortable retirement. We’d love to get to know your needs and what you have in mind for your later years. To set up a consultation and find out more, contact us today.