The secret to financial independence starts and ends with a good budget. This includes in retirement, even though you may not know how much your budget will change from your earning years to your retirement ones.
Using your current budget to determine your financial needs in retirement won't be accurate. Your daily expenses will likely be different, and you also need to factor in larger expenses that are often overlooked entirely. Here are a few common ones that might surprise you:
Helping Adult Children: Whether you help with bills, childcare, big ticket items, or the kids move back in with you altogether, if any of these occur, it’s bound to come with a hefty price tag. In fact, two-thirds of young adults who moved back home with their parents during the pandemic still live there.
Free Time: The shift from being chained to working hours to endless free time does have financial challenges that many don’t anticipate. Whether you choose to fill your free time with movies, lunching with friends, vacationing, or spoiling grandkids, your retirement hobbies aren’t something you can afford to overlook.
Healthcare: Since the cost of healthcare continues to increase, remember to account for the cost of co-pays, vision and dental care, and medications. Estimate high – current studies show that a 65-year-old couple retiring in 2022 will spend an average $315,000 in healthcare and medical expenses in their retirement.
Transportation: If you haven’t added in a line item for a new or used car payment and mechanical work to keep yours up and running, you could be looking at hundreds of dollars a month more in expenses to consider.
Hopefully this raises awareness on important expenses to consider when creating a retirement budget. If you want to connect to review your retirement budget, give us a call.