Planning for Retirement: Don't Forget These Expenses
Kids, Life Events and Travel Plans Should Be in Your Budget
When you’re planning for retirement, the first challenge is to figure out how much you might spend in those golden years.
Many people expect that, with the kids out of the house and the mortgage paid off, their needs will be minimal.
But if you stay healthy, your retirement could last 30 years or more. And some expenses will add up to be more than you might expect.
Be prepared for these, just in case:
#1: Your Kids Might Not Be Out of the House
Many 20-somethings are having a tough time making ends meet these days. Between student loan debt, a tight economy and low entry-level wages, some are still living with Mom and Dad.
#2: Weddings, Cars, Down Payments
When your kids finally leave the nest, they may still ask for your assistance in covering the "startup" costs of adult life. If you’re planning to help, factor that into your projections.
#3: Medical Expenses
Medicare doesn’t cover all of your medical expenses, so between the premiums you pay for Medicare and supplemental insurance and drug plans, co-pays, prescriptions and other things that are not covered by some insurance plans, your medical costs can add up. The Urban Institute and the AARP Public Policy Institute projected in 2013 that people who are now 25 to 54 will have an average income of $34,500 (in today's dollars) in retirement and should plan to spend about 20 percent of that on medical bills.
#5: Long-Term Care
Medicare Part A will cover a limited amount of care in a skilled nursing facility, or nursing care at home. But if you need those services long-term, you’ll have to pay for them yourself unless you have long-term-care insurance. If you don't, be prepared for the risk that you'll have to pay out-of-pocket for massive long-term care bills, either for yourself, your spouse or for other family members such as your siblings.
#6: Household Help
Even if you're fortunate enough to enjoy your golden years in great health, you still may want help with cleaning, lawn care, home maintenance and repairs.
People often dream of traveling in retirement. Want to see the Pyramids? Gaze at the Eiffel Tower? Visit the Tower of London? These are wonderful dreams, but you’ll need to plan to pay for them.
Resist the temptation to assume that your expenses will plummet in retirement. Sure, your mortgage may be paid in full and your children no longer need orthodontia, but new costs will creep up. Contribute regularly to your retirement portfolio in order to stay prepared.
Illustration by Peter Hoey | Paula Pant is a freelance journalist specializing in personal finance, investing, real estate and entrepreneurship. She has written for MSN Money, AARP Bulletin, DailyFinance, Business Insider and other publications.