When planning on how much to save for retirement, you first need to know how much you’ll spend.
The general rule is that you’ll need 70% to 80% of your pre-retirement income to maintain your standard of living.
However, a recent study found that nearly two in five (39%) retirees are spending more than they had expected.
With that in mind, there are at least five things you might spend more on once you retire.
Many retirees love to travel, especially on the kind of trips they could only dream about while working.
Cruises are a favorite. In fact, the majority (38%) of cruisers are baby boomers and 47% of them plan on booking another cruise. Furthermore, the average age of those take cruises lasting 16 days or longer is 58.
And they’re big ticket items…
Fares advertised for less than $75 per person per day, say to the Caribbean, are enticing.
But it can run double or triple that amount depending on the cabin you book, your drinking preferences, the number of spa visits, how many shore excursions you take, and whether you are a big shopper at the gift store. Gambling can shoot your tab to the moon.
To keep the price of your cruise under control, realize that the mass-market lines with the lowest prices include buffet meals and entertainment… not much more. They’re also the ones who are notorious for pushing all the extras.
And don’t forget the cost of getting to and from the ship.
So before booking your cruise make a plan:
· Estimate how much the trip will cost.
· Calculate the amount you need to set aside each month so you won’t have to run up credit card debt to finance the trip.
· Stick with your cost estimate while on the trip. Don’t succumb to pressure to buy extras that were not in your budget.
As we age, our health changes.
According to the Employee Benefit Research Institute, the average annual out-of-pocket health care cost for households ages 85 and above represents 19% of total household expenses. Between ages 65-74 it accounted for 11%. Preretirement it was 8%.
Some costs are predictable, others are not.
- The predictable ones include:
- Regular doctor visits
- Dental cleaning and exams
- Ongoing prescription medications
- Eye glasses
Examples of those that can come out of nowhere and have a higher probability of occurring as you age:
- Extensive dental procedures
- Emergency room visits
- Overnight hospital stays
- In-home health care
- Nursing home stays
And even if you’re on Medicare, there are a slew of items not covered, such as long-term care, most dental care, vision care, and hearing aids. Plus there are deductibles and copayments for doctors’ services and outpatient care.
So you need to have separate preparations for each.
Medicare Advantage and Medigap plans can fill some of those holes. There are also supplemental policies you can buy that cover dental, vision, and long-term care.
Another option is to sign up for a health savings account (HSA). To qualify, you must have a health insurance policy with a deductible of at least $1,350 for single coverage or $2,700 for family coverage. You can contribute up to $3,500 for a single or $7,000 for a family. Plus another $1,000 if you’re at least 55.
Moreover, the contributions are excluded from your taxable gross income.