Calculating all of your potential expenses during retirement can seem like a daunting task. The more you include, the better prepared you will be. Here are a few things that you should make a point to factor into your retirement budget:
Health Care – depending on when you plan to retire, you may need a plan to cover you and your spouse until Medicare’s coverage begins at 65. You may also want to consider a supplemental plan once Medicare coverage begins to cover some out of pocket expenses and more extensive prescription coverage. Long Term Care is a huge proponent that people over-look when planning for retirement. One major healthcare event can wipe out your savings and Medicare does not cover long-term care. Long Term Care insurance may be a good alternative to depleting your savings or depending on family to pay out of pocket for your care.
Home and Auto – there’s a very good chance that you will live 20 or 30 years past your retirement if you retire at 65 or 70 years old. And even if you have your house paid off, your house and your vehicles are aging too. Repairs, appliances, roof, transmissions, can all be expensive and deplete that nest egg. You will want to realistically plan for your housing and auto needs during your retirement.
Leisure – It’s your thing … do what you want to do. Finally. But, if you want to skydive, travel, play golf 24/7, that all takes money. Budgeting for fun is also a crucial part of planning for retirement. And some of those hobbies can be more expensive than others. Also, you will have to consider what you will be physically able to do during retirement. When you are 75, are you still going to be able to go out on that sailboat?
Taxes – You and your retirement financial advisor should consider your net requirements and determine what after tax number is essential to reach your needs. Do you have a Roth, which isn’t subject to retirement income or capital gains taxes or do you have a traditional 401k? Let your tax or retirement professional help you with what shape you’re in when it comes to paying taxes in retirement.