What Retirement Expenses Are You Most Likely to Face?

When planning for retirement income, the devil is in the details. Once you are retired, you want to be sure that you have more than enough income for your lifestyle expectations.

One way to get a good grip on this is by mapping and estimating what you expect your future spending to be.

This can give you a high-level perspective of how much income you will need for your idea of a comfortable retirement. Everyone has a different situation. Because of that, the amount of annual income that you will need will likely differ from others.

That being said, you can still have more clarity in your income planning and decisions by seeing what others’ financial experiences are in retirement. One helpful metric in this regard is understanding which expenses can dominate your retirement spending.

Here are four expenses that can take a bundle out of your retirement money if you don’t plan for them. Having strategies for these costs, and your overall expenses, can go a long way toward keeping your retirement goals on track.

Housing Costs

Perhaps surprisingly, housing costs are the largest area of retirement spending. Among households aged 65 and up, housing spending was the biggest expenditure in recent past years, according to the Bureau of Labor Statistics.

Home mortgage payments, or rental payments on an apartment lease, make up a large part of this area of spending.

Costs of home maintenance also can add up. Our ability to take care of maintenance issues might decline over time. With aging, we might turn to outside help to take care of more of these tasks for us.

If you are still living in your own home in retirement, there may be major home-project expenditures that can creep up: a roof replacement, upgrades to your home interiors to make them more senior-friendly, upgrades to the kitchen, or upgrades to living quarters, for instance.

You might also have other home improvement projects that you put off during your working years and that will help increase your home’s curb appeal for later.

Make sure your spending accounts for all of these possibilities. Your estimates should account for the recurring housing costs you pay on annual basis.

Also, don’t forget about property taxes as well as any taxes on property-related income streams such as mineral rights.

Healthcare Expenses

Healthcare often tends to go up as retirees move into their later years.

According to Fidelity, a 65-year-old couple who retired in 2020 might pay $300,000 in total medical and healthcare expenses throughout their retirement. Among single retirees, Fidelity estimated total healthcare costs of $157,000 for women and $143,000 for men, respectively.

For a 65-year-old couple, that anticipated price tag rose from $295,000 for healthcare and medical expenses in retirement, assuming they retired in 2020.

Your mileage may vary depending on the kind of Medicare coverage you have and the healthcare you receive. Medicare doesn’t cover all health expenses, as you are responsible for many out-of-pocket expenses yourself.

These include bills for eye care as well as dental care. If you have a Medicare Advantage plan, you won’t be paying as much for health insurance. But you will shoulder more of your healthcare expenditures as you move more into retirement.

A Medicare Supplement plan will enable you to pass more of these expenses to the insurance company. However, you will pay higher premiums for that benefit.

Your financial advisor or insurance agent can help you walk through your options. They can also help you develop strategies for managing your healthcare on an annual basis and helping control those costs as reasonably as possible.

Long-Term Care Costs

One of the biggest areas not covered by Medicare is long-term care. According to the Department of Health & Human Services, as much as 70% of Americans ages 65 and up may need some long-term care service or support at some point.

Long-term care can provide a variety of services for seniors. For example, some services help you with fulfilling certain acts of daily living that you might not be as physically able to do then.

Those can be bathing, eating, transferring, toileting, and other everyday activities. Other services include assisted living facilities, where chores such as yardwork and housecleaning are performed for the residents on a regular basis.

In other situations, long-term care might mean looking after someone whose mental or physical capacities have diminished considerably. This might be due to conditions like Alzheimer’s or other dementias.

Long-term care can also be costly. According to Genworth’s 2021 Cost of Care Survey, the median cost for a semi-private room in a nursing home in the U.S. was $7,908 per month. For a private room, the cost jumps to $9,034 per month, according to Genworth.

In-home care also comes with a price tag. Genworth reported that in 2021, the median costs for homemaker services and for a home health aide were $4,957 and $5,148 per month, respectively.

There are many insurance products that, with creative and proactive planning, can reduce this cost burden and help you manage this need.

These solutions range from long-term care insurance to innovative annuity and life policies built around generating tax-advantaged proceeds specifically for long-term care.

Your financial professional can guide you through these possible solutions and see what might make sense for your situation.

Entertainment, Leisure, and Hobbies

Many retirees have also found their spending jumps in regard to entertainment, hobbies, and other activities they do in their now-much-greater spare time.

In a survey by the Employee Benefit Research Institute, 21% of retirees said they were spending more on these than what they expected. It makes sense.

With all this new free time, retirees want to look for ways to occupy themselves and keep from becoming bored. For many people, their job was part of their identity, a source of social connectivity, and a place of friendship.

But now that they aren’t as involved in their workspace, retirees may find it challenging to find new ways to spend their time and keep up their identities.

Plotting out the activities that you anticipate pursuing in retirement — and that includes goals that you want to do but have been putting off for years — will help you overcome this potential hump.

Achieving More Financial Confidence About Retirement

Planning for retirement means anticipating the financial obstacles that you might face and preparing ahead of time for how you will get around them. During your career, your financial strategy was laser-focused on growth and accumulation.

As you draw nearer to retirement, a shift in strategy focus toward retirement income will be helpful. Your financial professional can help you prepare for this next life stage and for a comfortable, fulfilling lifestyle.

Consult your financial advisor for more information on retirement income planning and what it means to you. If you are looking for a financial professional to guide you — or you want another opinion of your existing plan — no sweat. Help is just a click away here at SafeMoney.com.

Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your retirement goals, your personal concerns, and your financial situation. Should you need a personal referral, please call us at 877.476.9723.