One of the main appeals of retirement is the promise of relaxed living. Unfortunately, if we retire and realize our retirement fund won’t go as far as we expected, we may experience more stress than we’d anticipated. This is why steady saving and calculated planning are important aspects of retiring on our own terms.
We need to plan realistically for a fund that will cover our daily needs. But when many people plan for retirement, their estimated final nest egg often fails to include the following common retirement expenses:
- Expect Inflation: While it is subject to change, inflation in America averages roughly 2% per year. At this rate, for example, a loaf of bread that costs $3.00 this year, will cost $3.06 the following year. Estimate the number of years that you will be in retirement and take into consideration that prices will likely continue to rise over time.
- Government-related Expenses: Find out what taxes you will be expected to pay in retirement. Any annuities, investment income, pensions, or 401(k)s are subject to income tax. This can be a complicated and costly topic, so do your homework. Find out your potential taxes, as well as your deductibles, and set your retirement budget accordingly.
- Plan for the Unexpected: Unfortunately, just because we are retired doesn’t mean that nature, bad luck, or emergency expenses will officially evaporate from our lives. Whenever possible, save additional retirement funds to cover the worst-case-scenarios, which are often when you will need to meet unexpected, large costs. Consider speaking with a professional to find out if you will still benefit from the protections of any insurance policies in retirement.
- Retirement-related Costs: When estimating how much you need for retirement, take into account what you anticipate your daily expenses will be. What people sometimes forget are other retirement-related costs, which may include moving expenses, health insurance payments if you are retiring before 65, and facility fees, if you are considering a living in a retirement complex.
The better you can financially prepare yourself for retirement, the more likely you will be able to retire in comfort, rather than worry. If you would like to learn more about retirement, visit the Syncis blog at syncis.com/blog.