Are you ready for retirement? It's supposed to be the time of your life where you kick back and relax, but without proper planning, it can quickly turn into a financial nightmare. Retirement planning isn't as simple as just saving and investing your money. There are a ton of personalized decisions that you'll need to make, and if you don't plan accordingly, you might end up on a shoestring budget when you're supposed to be enjoying the fruits of your labor!
In this video we discuss the four retirement expenses that catch most people off guard. We all know about the usual expenses like housing 🏠, food 🍽️, and transportation 🚗, but these unexpected expenses can sneak up on even the most diligent planners!
First on the list is healthcare costs 🏥. You might think that Medicare and supplemental insurance have you covered, but the reality is that healthcare costs in retirement can quickly spiral out of control. You'll need to stash away a ton of cash just to cover your projected medical expenses 💉💊, and that's not even accounting for the possibility of new medical treatments and technologies that can add even more costs down the line.
The second surprise expense is the "Go-Go Years" of retirement 🎉. These are the first few years of your golden years when you're still relatively healthy and want to maximize the fun 🎉🎊. But all that fun can come with a steep price tag! Retirees tend to overspend on travel 🌎✈️ and dining out 🍽️, and while it's important to enjoy life, you don't want to blow all your savings during these first few years and end up struggling later on.
The third expense that might catch you off guard is home maintenance 🏡. Even if you've paid off your house, there are still unexpected costs that can add up. A major repair or upgrade can quickly drain your retirement savings, and as we age, we may need to hire help for tasks we used to handle ourselves.
Finally, transportation 🚗 can be a significant expense in retirement. You might not have to commute to work anymore, but you still need to get around for appointments and errands. And as you age, you might need to give up your car 🚗 and rely on ride-sharing services like Uber and Lyft 🚕, which can also add up over time.
Don't let these unexpected expenses ruin your retirement! It's crucial to keep them in mind when planning for your golden years 🌞🏖️. Every retiree's situation is unique, but by understanding the longevity risk of your savings and reviewing your spending, you can ensure that you're prepared for anything retirement throws your way 💪👵. Subscribe to ours channel for more retirement planning tips and insights so you can live your best life in retirement!
Retirement planning is simple. Save money, invest money, until you get to a point where that money can sustain you for the rest of your life, manage expenses and boom retired. Simple right? I didn’t think so.
Look retirement planning can be very complicated. There are 100s if not 1000s of personalized decisions you have to make along the way. From how much you save, to how you invest in different markets, to what age you decide to retire. And even when you get to the point where you feel comfortable enough to retire. You’ve done all the savings, investing, planning, and you are ready to clock out for the last time. Many people have it in their mind that once they get to that point, it’s smooth sailing. I hate to be the bearer of bad news. It’s not. Most people plan their retirement by coming up with an income goal that they need to sustain their lifestyle, this is usually their expenses and inflation factor and then they create streams of income (whether that’s social security, withdrawal strategies from your savings or something like a pension or annuity) to achieve that goal. Here’s the problem, most people have no idea what they spent last month, let alone the ability to forecast years into the future.
Hey everybody I’m Johnathan Rankin, the founder of Theorem. If you're new here, make sure you subscribe to our channel so you don't miss any of our retirement planning videos. And if you've been following us for a while, welcome back! Today we are talking about 4 retirement expenses many people underestimate.
The Employee Benefit Research Institute once found that only 8 percent of people said they encountered lower-than-expected retirement costs. If your retirement plan is based on how much you will spend every month and that number is way off, then your golden years might turn out to be tin foil.
The first expense that might surprise you is the cost of health care. It is easy to think that once you are on medicare and you have your supplemental insurance that everything is taken care of. That isn’t the case. A 65-year old man enrolled in Medicare with a Medigap plan will need to stash away $166,000 for medical expenses to have a good chance (90%) of covering his projected health care costs in retirement, according to new research from the Employee Benefit Research Institute (EBRI) and because woman typically live longer, they estimate a 65 year old woman will need $197,000. Even the experts conducting the research believe those estimates are low. Advancements in medicine are helping us live longer and if you’ve ever had an old car or an old house, you know they require more maintenance as time goes on. The same can be said for us as humans.
The second retirement expense that might surprise you is how much you spend on the enjoy life phase of retirement. The first few years of retirement are the most exciting. This is what some call Go-Go Years. Where most people are in good health and they want to maximize the enjoyment of life during this time. Capital Group found that 40% of retirees spent more on travel than they expected. Retirees also spend more money than expected dining out. Look I get that one. If you were packing your lunch for over 30 years, going out to eat sounds a lot more enjoyable. This entire Go-Go phase of life typically costs more than expected because this is where many people justify the spending by saying “life is short”, enjoy it while you can. Well if you stay healthier longer than even you expected and life isnt as short as you thought it would be, then constant overspending can eventually catch up to you at some point. The last thing that you want to do in your 80s is see if Chat GPT can help you build a resume.
Which brings us to the third retirement expense that might surprise you and that is Home Maintenance. I have seen a lot of people plan their retirement around when their house is paid off, but just because your house is paid off, you can still end up spending thousands of dollars on your home per year. A report by the Society of Actuaries, found that the most common "shock" to retirement budgets was a major house repair or upgrade, with 28% of American retirees reporting this kind of expense. It doesn’t have to even be a major repair or upgrade. Think about the little things that can eventually add up. If you are the type of person that cuts your own grass or does the work around the house and eventually you get to the point where you just can’t physically do it anymore and you have to hire people to help you. That cost wasn’t initially planned for and when you add that onto the increasing health care costs and the overspending in the go-go years, it could create cracks in your retirement plan later in life.
The last retirement expense that might surprise you is actually transportation. Even though you're not commuting every single day to work most people don't retire and just stay home. Whether it's doctor's appointments grocery store or enjoying your go go years, the average American 65 and older spends $7160 on transportation per year. Now when most people think of transportation they immediately think of their car so that would be gas insurance repairs and maybe even a car payment. But at a certain point you might get to the point where you can't drive and with services out there like Uber and Lyft, that doesn’t mean you are stuck at home. In fact, a growing number of retirees are giving up their cars completely in exchange for ride sharing services to get around.
So to recap, The 4 retirement expenses that might surprise you, Health Care, Your Go-Go Years, Home Maintenance and Transportation. Now every retiree is different, and you might have expenses based on your life that others don’t experience. While these are only 4 expenses that you might face in retirement, it is important to make sure there are no big surprises in retirement. The best way to do that is by continuing to plan for your retirement even while you are retired. Review your spending, make sure you understand the longevity risk of your savings. It is really easy to do and if you need help, our firm would be happy to help, just click on the link in the description below to get started. If you are planning for retirement and you are saving in either a 401(k) or 403(b), you’ll definitely want to check out the video coming up next where I share the huge mistake that millions of people make with their 401k each year. I’ll see you there.
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