Your plan looks good on paper, but did you think of everything? Be ready for these expenses, which are often unpredictable but always possible.
Cars, home appliances and the rising cost of college tuition are among the savings-depleting expenses that many people in retirement, or approaching retirement, may not be adequately preparing for.
Many people do not “do a very good job of estimating what they will spend in retirement,” says Steve Johnson, a financial consultant in the Boston area for Charles Schwab.
Retirees or those about to retire may think they’ve covered the costs of future health care — but have they budgeted for 30 years of exponential increases in prices? And what about in 11 other spending categories?
“People often vary on the extremes,” he says. “We’ll have clients who saved their entire life and have a very large nest egg but are always fearful about spending that. Then, conversely, you have those who really want to maintain the lifestyle they had in their 40s and 50s but don’t have enough money. A lot of people don’t have a target of how much they are really going to need in retirement, and they really don’t have a plan.”
Health care and long-term care are among many people’s anticipated needs, but they are often underestimated given their
Housing, property taxes and maintenance
Housing is a major expected expense that may be under-assessed. Property taxes, and how they will increase over the years, need to be part of the equation. An aging house, coupled with the fury of Mother Nature, can mean unexpectedly large maintenance and repair bills.
“This has been a brutal winter. There have been a lot of storms, and people are now forced to add to their housing expenses in terms of costs for damage that has occurred because of the ice and the snow,” Johnson says.
Utility costs are another rising expense that may not get enough consideration, as illustrated by the current, unforeseen spike in oil prices.
“If people do their budgeting, they might go look at how much they spend on utilities, food and various expenses,” says actuary Steve Vernon, the author of “Recession-Proof Your Retirement Years: Simple Retirement Planning Strategies That Work Through Thick or Thin.” “They forget they are going to be retired for 20 to 25 years or more. They are probably going to need one or two more cars during that time; they might need to replace the roof, or the washing machine might go out. All these unexpected but big things can happen. Look back over the past 20 years. How many cars did you buy? How many washing machines did you need to replace?”