Sourced with thanks from kiplinger.com
Before you can determine how much you need to save for a fulfilling retirement (and you should), you first need to know how much you will spend in retirement. Typically, there are a number of heads on which you are likely to spend more on in retirement. The author in the article below alerts you to examples of such expenses. Team RetyrSmart
What are you likely to spend more on in retirement?
Sure, we’re all eager to hit the road again and travel, which has been curtailed for most people during the pandemic. And most retirees put travel at the top of the list.
Whether you plan to set off on luxury cruises (yes, on hold for the pandemic) — or simply pack up your ride for weekend getaways with your grandkids, you may find yourself spending more on travel in retirement than you bargained for.
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It’s fun to make big travel plans. Less fun: the reality that we spend more on medical care after we retire, and those costs keep increasing as we age.
The percentage of a household’s total spending on health care increases from 8% in preretirement households to 11.2% by the time a household is past the age of 85.
Unpredictable and costly new diagnoses and hospitalizations drive much of the increase in health care spending for the average retired household, but overall spending rises for general health needs, health insurance, prescription medication, medical supplies and medical services as well.
Chances are, you’ll have finished paying off your mortgage (or come pretty close) when you reach retirement age. That means you’ll be saving thousands each year.
However, the average retired household spends more each year on utilities than the average working household, according to the Urban Institute. Why? If retirees are home more often, they’re simply using utilities more — just like those of us who have been working remotely during the pandemic. If you’ve seen a bump in your bills, think of it as a warning.
With more time on their hands, retirees may exercise more —raising their spending on gym memberships and fitness classes (when gyms reopen and classes resume following the pandemic.)
Research has also shown that retirement itself is a motivator to get fit. With a flexible schedule free of commuting and the stress of a busy work week, many retirees drop unhealthy habits, such as drinking and smoking, and pick up healthier ones.
Approximately 53% of retired Americans participate in physical activity and allocate about 13% of their annual spending to fitness and leisure activities. Because of this, the fitness industry is starting to cater to seniors as well, offering more specific (and pricey) gym options for aging populations.
As they transition into retirement, most people’s lives aren’t radically altered. They may still drive to meet with friends or associates, grab coffee from around the corner, or use their laptop to do work from the comfort of their couch. What often does change after leaving the workforce, however, is who picks up the bill for a lot of the small stuff — lunches, parking, cell phone bills. “Small-business owners and professionals who retire are often surprised at how many of their expenses were picked up by their company. It is a jolt when they discover how much it adds up to.”
Despite their reduced income, Americans age 65 and up contribute almost 11% more to religious, educational, charitable and political organizations than people from 55 to 64. Retirees age 75 and older donate even more, on average.
Part of this phenomenon is psychological. Researchers have found that older adults take more pleasure in charitable donations than their younger counterparts. On the other hand, older retirees may have less control over their finances than they realize. A diminished capacity for financial decision-making in retirement is “extremely common, maybe inevitable.
Accumulating wealth over time is, generally speaking, a pretty good thing. The more wealth you’ve collected, however, the more elbow grease it’ll take to manage that money and make it work for you. That’s where financial planners come in. Their services can be invaluable, but they’re not free. Depending on the management style you prefer, figuring out what to do with your money can become an expense in its own right.