Most of us think that retirement is likely to be relatively inexpensive. After all, the house and car will probably be paid-off and the kids should be gone.
However, there are several expenses that you might not consider before it’s too late.
Plan ahead and don’t be surprised by the following 5 retirement expenses:
- Health care expenses: According to the data, the average 65-year-old couple will require $400,000 out of pocket to deal with medical expenses from retirement to age 92. While parts of Medicare are free, other parts are not.
If you have a higher income, expect these premiums to be even higher. The cost isn’t the same for everyone.
- Remember that long-term costs like nursing homes aren’t covered either, regardless of income.
Be sure to look at all of your health care and insurance options before retiring.
- Greater spending: You might have your house paid off, but what are you going to do with all of that free time?
When you’re working, you don’t have time to spend a lot of money. When you’re retired, you might want to do things that you never had the time for. Going to the movies, playing golf, dining out, travelling, and other hobbies and entertainment aren’t free.
It’s important to think about what your life will be like during retirement. From this ideal vision, you should be able to develop a reasonable budget. Are your financial assets going to be able to support this lifestyle? What can you do now to plan ahead?
If you’re used to having a company car, mobile phone, or other perks, you’re going to have to pay for these things yourself. The cost of former perks can be considerable.
- Social security taxes: Nearly every working person understands that they’re paying into social security. What you might not know, though, is that you’re likely to be taxed again when you receive that money back in Social Security benefits. The income threshold before taxes kick-in is quite low – about $16,000 for an individual. Be prepared.
- Tax-deferred accounts: You didn’t have to pay taxes on the income that you put into your superannuation fund. Unfortunately, you may have to pay taxes on your withdrawals. Adding to the misfortune, the withdrawals could be taxed at your top ordinary income tax rate. This is probably more than the capital gains rate.
So, if you want to buy a $25,000 boat, you might have to withdraw $30,000+ from your retirement accounts to cover both the boat and the taxes.
- Loss of income for the surviving spouse: At some point, one spouse is usually forced to survive without the benefits and income that came from the other spouse. Be sure that your estate planning covers the situation of a surviving spouse.
Retirement has its own set of expenses that must be taken into consideration. It’s important to plan for these expenses while there’s still time to make the necessary adjustments to your retirement plan.
Be prepared and enjoy your retirement fully.
General Advice Only The information on this website is general information only and has been prepared without taking into account your personal objectives, financial situation or needs. You should consider any advice on this website in light of your personal objectives, financial situation or needs before acting on it. You may wish to consult a licensed financial adviser to do this. The information on this website is no substitute for financial advice.