Retirement Costs
When planning for retirement costs, financial planners often calculate costs decreasing during retirement but there are some costs that will increase in retirement. It is important to plan for them. There will be a number of costs to consider when you’re approaching retirement. Budgeting may be easier because many costs will decrease like commuting, work clothes, lunches, dinners out when you are too busy to cook but there are at least 5 basic costs of living, which increase when people retire. These include:
1. Home/Property Maintenance Costs
The good news is that you will have more time to maintain your house but the bad news is all those repairs you’ve been putting off will cost money for materials even if you do the work yourself. It’s very likely that the cost of maintaining your home will increase during your retirement years, especially if you bought it many years ago and have been living in it for a while. The cost of home maintenance and improvement usually rises after retirement due to the age of the house and the need to replace things like the roof and the water heater, furnace or heat pump, etc.
2. Rent Costs
Having a roof over your head is always an important consideration. But it is also one of your major living expenses. Rent can cramp your lifestyle if you’ve not planned for it. One advantage of renting is that you don’t have to worry about maintenance or the associated costs. If you’re planning for your retirement and have not bought a house, budget for increasing rental costs in retirement.
3. Insurance and Medical Cost
Once people retire, their insurance and medical costs seem to increase as well. Unlike life insurance where you can lock in a rate for the rest of your life, as medical costs rise so do the costs associated with health insurance. In addition the more you use it the more the insurance companies charge you and of course as you age your need for healthcare increases as well. Stay active even after retirement to keep yourself in good shape, both physically and mentally.
4. Utility Costs
Let’s face it; weather conditions and oil shortages are two important factors that keep fluctuating over the years. As energy demands increase, so do utility costs. Energy demands increase once you are home all day. You can’t cut back on heating and cooling while you are away if you are at home. Plus as we get older we often like to keep the house a bit more “comfy” than when we were younger. So, plan for higher energy bills when you retire.
5. Vacation and Recreational Cost
This is a cost we all want to increase! For some people, retirement means a time to fulfill all their hearts desires – a time for relaxation and leisure. They look forward to doing all the things they couldn’t do during their working days. In the early years of retirement people want to travel and do all the things they put off while they were working. So in addition to maintenance around the house they will probably travel more, eat out more, and generally have more time for recreation whether it is golf or just visiting outlet malls.
These are just a few ideas on how you can spend your retirement. The most important thing is to thoroughly think it through and decide on how you want to shape it. Moreover, remember to plan with the possible increase in retirement costs.
One way many people are reducing retirement costs is through moving to a lower cost location whether it is in the U.S. or in one of the many retirement havens abroad. See: Retirement Abroad: Affordable Retirement Living for more information.