Be sure you’ve worked these expenses into your retirement planning-after all, no one can predict the future. You may also find that a close relative needs some financial help for whatever reason. Of course, you’ll want to spoil your grandchildren and other family members! Whether it’s a new bike or part of a college fund, be sure you’ve planned for these expenses.
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You’ll have more free hours to fill, so you might find that you increase your entertainment budget after you retire. What will you do with all your free time? Take a cooking class to help reduce your food expenses? Ballroom dancing? Cake decorating? Gardening? No matter what your interests are, you’ll want to continue budgeting for entertainment. When you do go out, take advantage of all the discounts you can find. You may have to rebalance how many times you cook meals versus eat out. Foodįood costs are highly susceptible to inflation-your food budget in five or ten years is likely to look very different from the money you spend today. You’ll have to pay income taxes on social security benefits, withdrawals from tax-deferred retirement plans, and other sources of income.ĭepending on your current financial situation, types of retirement plans, and amount of money that you’ve saved, you may actually end up paying more in taxes during retirement if you move up a tax bracket.Ī financial advisor or tax advisor can help you determine a tax-advantaged withdrawal plan to optimize your tax burden.
Taxes don’t disappear when you enter retirement. Making sure you can cover these kinds of unexpected expenses should be part of your overall budget. Even if you have Medicare, Medicaid, or health insurance, you’ll want to be sure you understand exactly what your insurance will cover. Many older folks choose to add on supplemental insurance to cover beyond Medicare have you decided whether you’ll add those plans?īeyond premiums, hospitalization, surgery, and nursing home care are expensive. There are two major concerns with healthcare after you retire:ĭepending on your insurance before you retired and which coverage you elect to pay for after you retired, insurance premiums can go up significantly. Be sure to look at your current bank statements to see what you’re paying for and how much it costs. Think of the other bills you pay regularly, like utilities, your phone bill, and other monthly costs. The likelihood of someone requiring daily assistance increases with age and can happen suddenly. However, it’s wise to also plan for the increased costs of assisted living. You could save on your housing expenses by moving to a smaller home in a more affordable neighborhood-or even a new city or state. Will you still be paying off your mortgage once you enter retirement? Will you be paying monthly rent? These are two big questions to answer, as housing will be one of the biggest expenses.Įven if your mortgage has been paid off, your home becomes more expensive to maintain as it ages, and property taxes regularly increase. Here are the main categories to think about. Costs to Consider in RetirementĪfter you determine what your income will look like, consider your expenses. Handy online retirement calculators can help you determine what your monthly or annual income will look like based on your nest egg, how many more years you expect to live, rate of return on your investments, and inflation. You’ll want to consider income from Social Security benefits, retirement investment plans such as a 401(k) or IRA, and any other income streams that will continue throughout your retirement, such as rental income from a real estate investment. Your retirement income will depend on how much money you were able to save before retiring.
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