Retirement Savings: 9 Expenses You Don’t Need To Include in Your Retirement Plan
Written by
Cindy Lamothe
Edited by
Chris Cluff
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
It’s normal to feel a bit nervous about your retirement plans, especially when you consider the fact that you won’t be getting a paycheck deposited into your account each month. But you can rest easy knowing that you’ll also have fewer expenses on your plate now that you’re no longer working.
“When people retire, some costs usually go down,” said Mark Stewart, certified public accountant for Step By Step Business. “If you’ve paid off your mortgage, you don’t have that monthly payment. You also save on commuting because you’re not going to work every day. Childcare costs often go down as kids become independent. Work-related expenses like buying professional clothes or daily work meals decrease too.”
That said, Stewart notes that, as you get older, healthcare costs may go up, so it’s essential to plan for that.
“Knowing these changes helps retirees plan for a lifestyle that’s comfortable and sustainable in retirement.”
In September, GOBankingRates surveyed 1,037 American adults about their retirement budgets. About 36% said they were not confident they will have saved enough for retirement. About 29% of those surveyed confessed to having zero dollars saved for retirement at all.
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and their average expenses were $52,141 — or $4,345 per month.
While experts warn against relying solely on Social Security to fund your retirement, the good news is that many of your expenses will go down once you’re out of the workplace. This can help boost your retirement budget and help you find ways to save.
Below are more expenses you don’t need to worry about when planning your retirement.
Commuting
Depending on the state you live in, Americans can spend as little as $2,000 or as much as $9,000 annually on transportation costs.
Once you’re no longer working, you don’t have to fret about long daily treks to the office. No more significant gas prices, paying for tolls or public transportation costs. You also don’t have to worry as much about car maintenance and repairs due to long commutes.
Saying goodbye to all these expenses means you also free up your budget and time.
Work Wardrobe
No more pricey office wardrobe purchases. If you’ve worked in a professional setting that required you to buy nice dress clothes or even a suit, you can breathe a little easier now that you’ll be out of the office.
One survey on workplace appearance by vision care company Nvision found that women spend an average of $328 a year on work clothes, while men spend about $307.
You can now thankfully opt for more casual and comfortable attire that will be less costly. You also no longer have to worry about dry-cleaning bills or expensive outfits for office parties.
Also: 7 Bills You Never Have To Pay When You Retire
Lunch Breaks and Coffee Runs
Data shows that hybrid workers spend $36 more per day when they work in the office, and their biggest expense is lunch.
If a big portion of your budget went toward eating out or grabbing expensive lattes on the way to work, you can take that expense out of your retirement planning costs. Now, you can enjoy more home-cooked meals and keep those pricey dinners reserved for special occasions or treats.
Childcare and Family Costs
According to the U.S. Department of Labor, childcare prices for a single child ranged from $4,810 for school-age home-based care in small counties to $15,417 for infant center-based care in very large counties.
That is quite a heavy financial burden on your budget. Thankfully by retirement, your children should be living independently and your childcare costs should disappear. This is a major expense that will now free up a significant portion of your retirement budget.
But aside from childcare, you also won’t have to pay for additional food or clothing or for any big-ticket items such as new computers or tuition. With your kids grown, they likely will be paying for all of their own needs, which will ultimately free up cash in your monthly budget.
Debts
“Ideally, retirement really would be a financial breeze and quite rewarding for individuals who were intentional and strategic about planning for their retirement days,” said Mafe Aclado, general manager at Coupon Snake. “The truth is, for these individuals, debt is top on the lists of expenses that they need not worry any more about during retirement.”
From student loan debts to car loan debts and even mortgage loans, she said that in an ideal situation these overwhelming debt loads would have been completely paid off by your retirement age — which involves thousands of savings per year.
Taxes
According to Aclado, high income tax is another regular expense that people generally stop needing to pay at retirement, and this is basically because their income steps down to a lower bracket.
Arvin Khamseh, CEO of Sold Out NFTs, pointed out that your retirement locale can affect your taxes as well. If you live in a state that has no income tax or has a low-income tax rate, then your tax bill will be much lower than it was when you were working.
Mortgage
One rule of thumb, according to experts, is that you’ll need 70% of your pre-retirement yearly salary to live comfortably. However, data from the U.S. Census Bureau American Community Survey shows that in 2021, the median U.S. mortgage payment was $1,672 — a large chunk of change.
Owning your own home or paying off your mortgage by the time you retire can significantly improve your cash flow.
Many retirees experience a drop in mortgage expenses, said Josh Michaels, finance specialist and CEO of Money4Loans, either by paying off their home loans or downsizing to more manageable properties.
Experts note that when planning for retirement, think about paying off your mortgage by the time you leave the workforce so you can eliminate this major monthly expense and have more money for your other needs.
Life Insurance
Another area where retirees can save is insurance premiums, Michaels said.
“While health insurance remains crucial, the cost of life and disability insurance often becomes less relevant and can be reduced.”
Before retiring, life insurance is a must-have when you have a family, are paying off a mortgage and have children to support. It’s an extra layer of protection in the event of something happening to you. Most experts will recommend buying a policy early in life as a financially smart move to make.
According to data from Policygenius, a 25-year-old male pays $39.48 a month for a 30-year policy worth $500,000, while a 35-year-old will pay $46.42 — 16% more. At 45, the rate is $105.07 per month.
Later in life, however, you won’t need to rely heavily on life insurance because your kids will be grown and independent and your spouse will be able to count on your retirement investments as an added layer of financial security.
All of this is to say that you won’t have to keep up with those costly premiums once you retire. Experts say to keep in mind, however, whether all of your debts and mortgage are paid off.
More From GOBankingRates
