Major Expenses in Retirement and How to Prepare
You have a lot to consider as you prepare for retirement. Hopefully, you began saving money when you started your career and have built up a comfortable nest egg for yourself.
As you were planning, though, there may have been a few things you didn’t know you should be saving extra money for. These are some of the most common, yet unexpected retirement expenses that can put a dent in your retirement savings.
While you will likely receive Medicare, it’s important to know that this alone will likely not adequately cover all your medical bills. Many retirees find that they also require a Medicare supplement plan to avoid going into medical debt.
One thing many people look forward to in retirement is the extra freedom to travel. No longer do you have to ask for vacation days! As an older citizen, however, you might incur some extra expenses, such as travel insurance to protect you if you need to cancel plans due to a health-related problem.
Older travelers may also want to look into special travel health insurance options, because your stateside insurance, like Medicare or Medicaid, likely won’t be accepted if you are traveling overseas or country borders.
Major Home Repairs
Home repairs are an inevitable reality for all homeowners, but when they hit during retirement, the bill can be especially inconvenient. If you haven’t set up an emergency fund separate from your 401(k) or IRA, withdrawing from these accounts will trigger income tax you’ll have to pay in addition to the repair bill.
Death of a Spouse or Partner
As you get older, the heartbreaking reality is that you or your partner will pass at some point, leaving behind not only heartache and pain, but the problem of paying for funeral services. Most people draft a will or trust, but they are less likely to set aside a fund for funeral costs. Choosing a funeral provider who allows you to prepay at today’s prices could end up saving you a lot of hassle and money. You’ll have all the plans already in place and you’ll avoid the potentially higher funeral costs hopefully far in the future.
While car insurance rates typically decline between the ages of 25 and 65, they start to rise again after that point. Most auto insurance companies view older drivers as a higher risk because of their increased likelihood of developing physical problems, impaired vision or a decline in cognitive function.
Seniors also tend to use their vehicles more often. While you were working, you might have had a short commute to the office or ridden public transportation, but now that you’re home, you may use your car for frequent trips around town. As a result, you may spend more money on gas, oil changes and repairs.
Keep Your Retirement Budget on Track
There are plenty of online budget worksheets you can fill out to help you plan for your future retirement expenses, but what they lack is the option to include money for unplanned expenses like the ones detailed above. Outside of budgeting sheets, though, there are a few ways you can work some extra money into your budget so that if the unthinkable happens, you’ll have the resources to handle it.
Set Up a Financial Reserve
Set aside 10 percent of your savings and dedicate that amount to an annual budget line item in your retirement plan for unexpected expenses. Every year before you retire, you can reserve some money after making sure that your needs during retirement are fully funded. The only catch is that this money will be funneled from your “wants” budget, leaving it at 90 percent of what you were initially planning.
Research Potential Expenses
Service costs will vary from year to year, but there’s no harm in asking your insurance company or dentist how much they typically charge an older patron. Asking ahead of time will give you a much better idea of the amount you should be setting aside for these expenses.
Live, Learn and Grow at Twin Lakes Community
In an unpredictable world full of surprises – financial or otherwise – it’s comforting to come home to a place where transition isn’t about what you give up, but what you’ve gained.
Twin Lakes Community in Burlington, North Carolina is a neighborhood where independence and community are treasured. We strive to help you find a place where you can expand your horizons and live an intentional life of purpose.
Schedule your visit to our community online or by calling 336-538-1572 today.