As you head toward retirement and your excitement grows, don’t forget to consider your likely retirement expenses.
An AARP article, 10 Biggest Expenses in Retirement has some interesting information about retirement expenses.
Healthcare expenses can pack a punch
For many, healthcare is an underestimated retirement expense. If you’re currently in good health, your healthcare spending when you first retire will likely be pretty reasonable. But as you age into your 80s and beyond, your healthcare spending is likely to surge.
Often, total healthcare expenses during retirement are lower for husbands because, statistically, their wives will outlive them and provide them with caregiving activities. That also means the surviving spouse must often cover their own caregiving expenses, which tend to vary widely in different parts of the country.
Currently, healthcare expenses are seeing faster inflation rates than any other spending category. And the article points to experts who think healthcare costs will increase about five percent annually during the next 30 years. That’s roughly twice the rate of other costs.
Considering the expected future costs of healthcare, it may be all the more important to be thoughtful about discretionary spending like restaurants and travel while you’re in your 60s and 70s so that you have the money you’ll likely need in your 80s and 90s.
Home maintenance costs are forever
Home maintenance is another considerable but underestimated expense during retirement. Necessary home projects don’t vanish once you retire. If you intend to stay in your home for several years after you retire, there’s a good chance that you’ll see your home maintenance expenses increase. The reason for that is that you’ll probably have to hire people or service companies to take on many of the tasks around the house that you handled yourself when you were younger.
That includes things like mowing the lawn, cleaning gutters and windows, repairing loose floorboards, unplugging drains, and more. In retirement, some folks may even have to hire a home cleaner for the first time, because vacuuming and other regular tasks are too much. All those services are convenient and necessary, but they also cost money.
Hitting the open road
During retirement, travel costs may vary significantly depending on where you go, when you go, and how you go. If you’re paying for kids and grandkids to join you or you’re staying at a five-star resort, you’re obviously going to spend a lot more than you would for a state park camping trip.
It’s often recommended that retirees travel more often early in retirement because as you age, you may not be able to venture out as much and you may also need extra money for healthcare expenses.
Transportation will cost you
The article next addresses transportation. Even though many folks no longer have to worry about a commute after they retire, most are still going to need a reliable set of wheels to get to appointments, the grocery store, and to a grandkid’s Little League games.
Early in retirement, that may mean hanging on to the car you had during the last couple years you were working, or it may mean replacing it with something reliable and affordable.
But either way, you must factor in gas, insurance, oil changes, tires, and unexpected maintenance. Much like it is with your home, your car’s needs don’t vanish because you’re no longer working.
The meter keeps running even in retirement
The next retirement expense that some folks fail to adequately consider is utilities. Thankfully, as the article notes, many retirees enjoy lower utility expenses. After all, in retirement you no longer have teenagers taking hot 45-minute showers or firing up the oven twice a day for pizza rolls.
A number of retirees also downsize soon after leaving their careers which naturally means less cost for heating and air conditioning. But even with a smaller home and fewer people in that home, the rates utility companies charge consumers are likely to increase regularly, if not annually.
Source: https://www.aarp.org/money/budgeting-saving/info-2023/most-common-underestimated-expenses.html
