Are you prepared to safely retire? Do you know what expenses you will face? Allen Saunders said it best “Life is what happens to us while we are making other plans.”
Anticipating costs like utilities and medicare premiums will help you prepare for a stress-free retirement. Even if you have a budget covering all your everyday expenses, life can catch you by surprise. Your heater bursts, a family member needs a loan, or worse, you have a medical emergency or auto accident. There’s no way to predict when disaster strikes. Still, you can start an emergency fund to cover some of these unexpected expenses.
Here are 10 costs you have to include in your retirement budget:
1. Home repairs
Home repairs and maintenance are the most significant annual expense. They cost, on average, $1000 a year, according to the 2018 Consumer Expenditure Survey. That being said, you should have at least that amount in your budget for household repairs.
To avoid any surprises and give you some idea of the costs you can expect, do a home inspection before you retire. According to HomeAdvisor, an inspection is typically between $278 to $391.
Experts suggest following the “1% rule”: On average, expect to spend 1% of your home’s total sale price on maintenance each year.
It would be best to pay off your mortgage before your golden years; this way, you will eliminate a monthly payment.
2. Family members
Nothing can throw off a retirement budget quite like family members. According to different studies, even after retirement, almost half of senior parents still provide financial support to an adult child. Costs can vary widely: student loans, rent, phone bills, gifts, or any of dozens of other possible expenses.
Depending on your willingness to say “no,” it is essential to add “financial support” in your post-retirement budget.
3. Home renovations
Most seniors want to grow old in their own homes, but most don’t think about the costs. Known as “Aging in place” means you have to adapt your home to be a safe and accessible environment.
An essential part of the retirement budget is thinking about how you will pay for these changes. Things like adding a ramp at the front door, install walk-in-tubs, carpet-free flooring, more comfortable handles on door, wide hallways and doorways.
4. Medicare premiums
According to the Bureau of Labor Statistics, on average, people who are 65 or older, spend $6802 a year on healthcare. If you think just because you have Medicare, you don’t need to worry, you are wrong.
Some seniors forget about the recurring costs, like premiums and deductibles. In contrast, others don’t know the premiums can vary according to income.
You can pay premiums with supplemental policies, like Medigap, to cover some costs. However, it is still an expense in itself.
Be sure to have some money set aside in case of health emergencies.
5. Taxes
Taxes are a big problem, even if you are retired. Just because your working days end, it doesn’t mean your federal income taxes end too. Depending on the state you live in, remember some states tax Social Security benefits.
According to the Bureau of Labor Statistics, in 2018, seniors paid $3,796 in federal income taxes on average. Delaying the start of Social Security, so you will minimize taxes and maximize your lifetime income.
6. Long-term care
Long-term care refers to continuous care that’s needed to allow patients to function. It is often associated with seniors, including everything from assisted living facilities to nursing homes to home health aides. Almost 70% of folks 65 and over will need long-term care, and that’s something you’ll need to plan for.
According to the 2019 Genworth Cost of Care Survey, National median costs range from $1,625 per month for adult day health care at a community or assisted living facility, to $8,517 per month for a private room at a nursing home.
Because Medicare generally does not cover long-term care, having a policy in place can be a solution. Be sure to apply early for long-term care insurance; this way, you have a bigger chance to get a health-based discount on your premiums.
7. Travel
Baby boomers finally have time to travel as much as they want. But exploring the world comes at a cost. According to an AARP travel survey, seniors are expected to take four to five leisure trips — and spend more than $6,600 on travel.
Be sure to factor in plenty of room in your budget for travel expenses. Take advantage of the senior discounts and travel during weekdays and off-peak times. Many airlines, hotels, rental car companies, and public transit options offer seniors deals.
8. Entertainment
Your golden years come with a lot of extra free time. Occupying that time with hobbies, exercise, and leisure will cost you a fair amount of money. According to the Bureau of Labor Statistics, baby boomers spent, on average, in 2018, $2,958 on entertainment.
Be sure to include leisure in your retirement budget so that you enjoy your golden years comfortably. Search for discounts for seniors, such as deals admission to museums and movies, and some colleges offer low-cost classes for retirees.