Helping people plan for retirement is one of our specialties at Financial Freedom Wealth Management Group, LLC. Accurately calculating your retirement expenses is one essential part of the formula. Unfortunately, over 50 percent of Americans underestimate the expenses they’ll have in retirement.1
Here are six of the most common big-ticket items that many individuals often overlook when it comes to creating a retirement strategy.
- Healthcare: More than 3 out of 4 baby boomers have never estimated healthcare expenses. The average couple is expected in incur $265,000 of healthcare expenses in retirement.2
- Housing: Even with a paid off mortgage, the costs of running a home can rise at a rate higher than anticipated. It’s important to consider utilities, home maintenance, repairs and more.
- Entertainment/Hobbies: In retirement, many people turn to entertainment, hobbies, travel and other activities to fill their free time. These all cost money. Estimating the true expense of these new or expanded activities can be difficult.
- Extended Care: The federal government estimates that 70 percent of Americans will need some type of extended care at some point. The average monthly cost for a nursing home is nearly $7,000 and for an assisted living facility the cost tops $3,000.3
- Taxes: We still pay taxes in retirement, don’t forget to add that into your strategy.
- Giving to Adult Children: Gifts to adult children and grandchildren is hard to estimate since the events that may prompt gifts are unknown at the time.
As your retirement day approaches, revisiting your spending assumptions may be one of the most important steps you can take in assessing your retirement readiness.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
1Journal of Accountancy, November 2015
2Voya Financial, 2018
3U.S. Department of Health & Human Services, 2018