Don’t Let These 3 Retirement Expenses Catch You By Surprise
You may assume that your expenses may either stay the same or decline in retirement. If so, you might be in for a surprise. Some specific expenses — like the cost of commuting to work — may disappear from your budget when you retire. But you may also face new expenses that you might not have considered. Here are a few examples of retirement expenses that might not have crossed your mind.
1. Home Renovations and Medical Home Retrofits
Your retirement may last several decades. There’s a possibility that you’ll need to remodel your home during that time span. Americans spent $300 billion on home remodeling in 2013, according to a study conducted by Harvard University and published in 2015. Baby boomers, who are today’s retirees or near-retirees, account for nearly half of that spending. Not all of these home improvements are discretionary either. Many homes need to be retrofitted to help accommodate physical disabilities and limitations, such as widening doorways for wheelchair accessibility or installing a motorized stair lift. “Most homes owned by those age 55 and over lack key features that promote accessibility,” the study reported.
2. Your Grandchildren’s Education
The average cost, which includes tuition, fees and room and board, of attending a four-year public in-state college during the 2016-17 school year is $20,090, according to the College Board. This includes tuition, fees, room and board. This figure is rising at an average of 6.6 percent annually, according to the Department of Education. Translation? Your grandchildren may spend close to $100,000 (in today’s dollars) to obtain a four-year undergraduate degree. You might choose to help cover a portion of this with your retirement budget.
3. Medical Bills
It may be tempting to assume that your medical expenses will be negligible once you’re covered by Medicare. Unfortunately, that may not be the case. Medicare recipients spend nearly 14 percent of their household budget on medical expenses, according to the Kaiser Family Foundation. This percentage has been “virtually unchanged” between 2002 to 2012, the foundation reports. Basic Medicare coverage (Parts A and B) may cost around $6,190.80 per year for those who pay Part A premiums, according to Medicare.gov. Additional out-of-pocket medical costs can raise this amount higher.
If you’re already retired or close to retirement, you might have a good idea of how much income you’ll expect to receive from Social Security. But if you’re in a younger generation, be aware of this note from the United States Social Security Administration’s (SSA) website: “Your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 cents for each dollar of scheduled benefits.” Once you begin collecting benefits, the SSA adjusts your earnings to reflect cost-of-living changes. But the SSA informs people who have not yet started collecting benefits that “your earnings may increase or decrease in the future.” It’s possible that legal and economic forces may erode your purchasing power.
You might assume that your living expenses in retirement may be similar to your spending today. But as time marches forward, you may find yourself with new, unanticipated bills. As you plan for your golden years, make sure that you prepare for unforeseen costs. You’ll relax and enjoy retirement a little more with the assurance of financial security.