Retirement can be a time for relaxing, traveling and exploring new hobbies. However, many seniors are not enjoying their retirement because they never created a realistic spending plan and their assets are insufficient to provide the retirement they desire. A key component of planning for retirement is examining your current expenses as well as estimating future expenses to ensure you’ll have an adequate income to cover all your costs. Understanding your retirement spending plan should be a top priority. In this blog we provide some basic tips for retirees along with what to consider when creating a retirement spending plan.
Housing
Housing is typically the biggest expense for retirees. In fact, the average retiree spends about $1,294 per month on housing. Costs related to housing include homeowners insurance, furniture, utilities, landscaping costs and maintenance. To reduce costs, you may want to consider downsizing to a less expensive house or neighborhood. Some retirees even relocate to communities that offer a lower cost of living. Another option is taking out a reverse mortgage to utilize the equity in your house for everyday living expenses or larger one-time needs.
Healthcare
Healthcare bills can easily eat away at a spending plan, especially for retirees. One way to reduce your healthcare expenses is to compare and contrast the differences between Traditional Medicare (with a supplemental policy) and Medicare Advantage plans. However, before you change a healthcare plan, you’ll need to talk to a specialist who can help you make the best decision given your situation.
Transportation
Besides the cost of your car, you’ll also want to consider additional car-related expenses, such as insurance, maintenance, gasoline and other factors. Transportation costs can be reduced by having only a single vehicle. If you live in a large city and don’t need to travel far to visit family, you could even give up your car and depend on public transportation, if necessary.
Consider Family Expenses
Costs involved with caring for elderly parents can easily compromise your retirement spending plan. Therefore, if this situation affects you, it’s critical that you take this into consideration when developing your spending plan. Your aging parents may need your help with assisted living costs, home healthcare costs, or paying medical bills. Another cost can be helping your parents with everyday living expenses, such as groceries.
Even though your grown children may be financially independent, you still may want to help them with larger ticket items, such as with college expenses or a down payment for a house. Just be sure you’re able to afford these costs and can manage your own expenses prudently.
Other Considerations and Warnings
- Although you can collect Social Security as early as age 62, the benefits you receive will be permanently reduced.
- One way to generate some income is by renting out property, such as an unused vacation home.
- When deciding if and how much money to leave to your children and grandchildren, be confident that it will be used in ways that are in line with your basic values.
- Don’t forget to set aside some money for fun.
Planning for retirement can be overwhelming for many people. If you would like help, please schedule an appointment with one of Sharkey, Howes and Javer’s CERTIFIED FINANCIAL PLANNER™ professionals to help you create the best financial plan for your specific needs.
Resources:
https://www.fool.com/retirement/general/2016/01/25/heres-what-the-average-retired-americans-budget-lo.aspx https://www.ssa.gov/planners/retire/agereduction.html http://money.usnews.com/money/blogs/on-retirement/articles/2016-08-10/7-tips-for-budgeting-in-retirement
