6 Retirement Expenses To Prepare For
If you’re approaching retirement, one of the tasks on your radar should be preparing a retirement budget. Although your financial life might be much less complicated after you stop working, there’s one major factor that will change — you will no longer have steady income from a job.
This makes budgeting a critical step in planning for a successful retirement. Without excess income available from your job, you’ll have to work hard to keep your expenses in line with whatever money you are drawing from your savings, Social Security and any pensions or other sources. Here are some of the most important costs that you shouldn’t overlook when planning your retirement strategy.
Emergencies
As you head into retirement, you’ll want to ensure that your emergency fund is padded as much as possible. While you’re still working, you’ll be able to refill your emergency fund with additional savings if you ever have to draw on it, but after you retire, it becomes easier to completely deplete it.
Depending on your lifestyle, you’ll likely want at least six months of expenses covered in your emergency fund, and possibly as much as one full year.
Travel
One of the things that Americans look forward to most of all during retirement is travel. While not all retirees set off on cruises around the world, many still have increased travel expenses simply from visiting family and friends, even at a local level.
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Just by virtue of having more free time and not having to report to work, you’re generally more likely to visit more people and places. Even if you don’t feel that you’re the traveling type, you may get a hankering for it once you’ve retired, so it’s always wise to incorporate travel into your budget.
Home Maintenance
As you get older and move through retirement, so too will your home if you own one. You should expect your aging home to require upkeep and maintenance, so be sure to include this expense in your retirement budget. While it’s true that if you’re in good shape you can handle some of your home maintenance on your own, you’ll still need to pay for supplies.
If you feel like home maintenance will just be a drag on your retirement budget, you can always consider downsizing and/or moving to a rental unit once you retire. But this is why it’s a good idea to look ahead to your retirement budget and lifestyle before you stop working, so you can plan ahead as to your best course of action.
Healthcare
Healthcare should definitely be a line item in your retirement budget, as it’s nearly inevitable that you’ll need some type of care after you retire. From prescriptions to health screenings to follow-up doctor visits, it’s highly likely as you get older that healthcare will be one of your primary concerns.
Even though Medicare and/or private insurance may cover many of your costs, it’s just a fact of life that on average, older Americans have more health issues and concerns than younger ones. Being prepared is a way to make sure you can avoid financial difficulties from these increased expenses.
Hobbies
One of the great joys of retirement is that it affords you free time to enjoy your hobbies, and/or to develop new ones. In fact, many healthcare professionals recommend that you adopt a few hobbies in retirement to fill up your extra time and keep your mind sharp and engaged. Investing in a hobby can also be a social experience if you join a club or society of like-minded individuals and share your common interest.
Regardless of whether you prefer to engage publicly with others or keep your hobby activities to yourself, your budget will likely increase after you retire simply because you have more time to devote to it. Depending on whether your hobby is needlework or restoring classic cars, for example, you should adjust your budget accordingly.
Gifting
By far the most voluntary option in your retirement budget, gifting can also be a large one for those who are charitably minded. Many who accumulate sizable nest eggs by the time they retire plan on donating some of their funds to charity. Even if you only have a modest amount saved up, it’s entirely possible that once you retire you intend to share some of your wealth with children, grandchildren or other family members.
While not for everyone, if this is your intention, you’ll want to plan ahead and incorporate gifting into your retirement budget so that you can strike the balance between funding your own lifestyle and giving to those you care about.
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