You may be thinking that you are still young and too far from retiring. You may say that you do not need to concern yourself with it just yet. But preparing early will make a big difference. Before you jot down all your retirement plans, we have developed the ultimate list of retirement costs that you have to start saving for.
Once you retire, you will have less source of income, that is why it is best to save for your retirement as early as possible. Knowing what you are saving will help you budget wisely. According to the U.S. Census Bureau, 18 years is the average retirement length. Within this period, these are the expenses you have to prepare for:
This is where a big chunk of your retirement savings will go to. Unless you have cleared your mortgage before you reach your retirement age, you need to pay rent or monthly mortgage fees. According to the Bureau of Labor Statistics, the average housing cost upon retirement is $1322. This amount will also include minor repairs, property taxes, maintenance, and other house-related expenses. Also, this amount is only the average cost. This could go up or could decrease depending on your housing choice.
When retirement is in the discussion, this is the first thing that comes to mind. Health declines as we age; thus, health cost goes up as we get older. Your future health status and possible illness cannot be foretold, and there is no defined budget for retirement health care. But some health care providers can cover your health care cost after retiring. Usually, people get health care plan insurance and pay it off before they retire. If you pay for it during retirement, the average health care insurance premium monthly cost is $499. Basic Medicare has a lesser fee of $135.50 but does not cover several medical needs.
Aside from knowing how much it will cost you to maintain your health during retirement, it is also best to see the cost of long-term care like nursing home care. According to the Department of Health and Human Services, the average semi-private room costs around $6,800 per month.
According to the Bureau of Labor Statistics (BLS), the average retirees’ food cost ranges from $6,800 to $6,303. Annual food costs for retirees are lower than working people since older people watch their diet closely and usually cook their meals. But this cost may go further up or further down depending on your shopping and grocery list.
Utility bills go hand-in-hand with having a house. Most retirees consider downsizing – moving to a smaller home, owning smaller and fewer appliances, etc. The cost for this item will solely depend on the lifestyle you are planning to have upon retiring. The cost varies mostly depending on your standard of living.
Since retirees no longer need to drive to work and have less social responsibilities to go to, the transportation cost cuts down to around $6,000 a year. This cost includes fuel, insurance, and maintenance.
You may think that you can skip clothing expenses, but you always have to stay warm during winter and stay cool during summer. It is safe to allot $1,000 per year for your clothing. Remember, you are still to attend other important events such as the wedding of your favorite nephew or your grand high school homecoming.
Yes, you read that right. There are still taxes to pay even after you retire. The tax you will need to pay depends on your retirement income. It is best to list down all your possible properties and pension after retirement then compute your Retirement income tax. If you do not have this pre-determined, you might be surprised how high a retirement tax could go.
If you are retired, it doesn’t mean you would have yourself rot inside a cave. Fun should still be part of your day to day activities. In planning your retirement budget, do not forget to allot funds for a cable subscription, your favorite club membership fees, mobile plan, and even concert or movie passes.
Everyone dreams of going to new places and having great adventures even after retirement. Do not forget to list down all your travel plans and save an ample budget to fund those itineraries.
Retirement isn’t just about riding into the sunset. You have to keep in mind that even retirement comes at a price.