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What Will Your Expenses be During Your Retirement Years?

Published on May 9, 2016

What Will Your Expenses be During Your Retirement Years?

It’s nearly impossible to know that now, right? That makes it hard to know how much you’ll need to save for those golden years (and avoid having them tarnished by the high costs of living you didn’t anticipate).

Fretirement-signor example, take your utility bills. You know how much you’re spending today for gas, electric and water but what about 20 years from now? Who can tell?

This makes it hard to determine what you’ll need to live comfortably after you stop working. However, according to an article in USA Today, some of those expenses will drop, not increase. In fact, Bureau of Labor Statistics data from 2013 showed that spending of post-retirement households (ages 65 to 79) was about 77 percent of spending of pre-retirement households (ages 50 to 64).

Here is a look at other expenses to keep in mind as you plan for your retirement expenses.


  1. Medical expenses

We’ve written about this before—how the average retiree will need more than $200,000 to cover healthcare expenses in later years (even after you are on Medicare, which you pay for out of your Social Security benefits). With longer retirement horizons for many Americans than generations that came before, those expenses really add up. Plus, many people opt for secondary health insurance to cover what Medicare does not so that is an additional monthly expense to consider.


  1. Insurance

Homeowners — If you change your place of residence, you will probably reduce your property & casualty insurance. If you’ve moved to a retirement community, for instance, you won’t pay your homeowners insurance but might have renters insurance or other associated expenses. Or, if you’ve downsized, your homeowners premium is likely to downsize along with the size of your domicile.

Life — Since you no longer have work income to cover in the event of your death, you might consider reducing your life insurance (if you and/or your spouse or dependents are able to live off your investments comfortably). For example, with kids grown up and an IRA to fund retirement expenses, many older adults may choose to cancel or let expire a term life insurance policy.

Disability — If you are no longer working, you won’t need the disability insurance you carried to cover lost income.

Even if you continue to work part-time, you can still reduce those insurance policies and save some money.


  1. Taxes

Bear in mind that a portion of your Social Security income is taxed and depending on your particular financial situation, it might not be taxed at all. It’s best to speak to your accountant or financial planner about how this will work for you so that you are prepared.

Photo-coutesy-of-401K-Flickr-Creative-CommonsDepending on the type of IRA you have, you might pay taxes on the distributions. With a Roth IRA, that money is withdrawn tax free (it was taxed going in); funds in a 401(k) or Traditional IRA have been growing tax free but are taxed upon distribution. Amounts are based on several factors which your financial advisor can explain.

If you are a homeowner, you’ll pay your property taxes so be sure to budget for that.


  1. Housing

Maybe you’ve paid off (or will soon) pay off your mortgage – think of how much money you’ll save after that! Even with homeowners insurance, property taxes, utility bills, and/or common area maintenance changes (if you are in a condo), you will lighten the financial load when the mortgage is done and gone.

If you make the move to a retirement community, it’s likely that your monthly housing expense will go up but it will also include a lot of things you pay for out of pocket now. Or, maybe you’ll sell the house and relocate to a less expensive region of the country. Everyone’s needs, plans and lifestyles differ and so will your housing expenses, depending on what you do or where you go.


  1. Lifestyle

Entertainment, travel, hobbies, pampering and more can eat up a lot of money. If you are accustomed to spending lavishly on these when you were working and don’t plan to curtail the fun when you retire, be sure you have budgeted accordingly from your planned retirement income.France2

Commuting to work, dining out with co-workers, and a work wardrobe all contribute to work-life expenses that you won’t have during retirement, so you will save money there (you can put it towards traveling to check out foreign retirement destinations!).

Plus, you are technically done saving for retirement because well, you’re already there—and have put enough away already.

Speaking of saving for retirement … have you self-directed your retirement plan? Self-direction is a great way to build up a more eclectic and potentially more lucrative portfolio that enables you to live it up in style when you retire. Self-directed retirement plans may include a wide array of nontraditional investments that enable you to build up greater retirement wealth through vacation properties, commodities, precious metals, unsecured loans, and many other alternative assets. You can read more about self-directed retirement plans by downloading our white paper or contact our helpful staff at Info@NextGenerationTrust.com or 888.857.8058 to get started.

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