7 Retirement Budget Killers
Missing Budget Items Can Be Deadly to Your Retirement
Do you ever wonder where the money goes? It seems there is no perfect way to account for every expense. Most often it's the "one time" expenses that you forget to include in your retirement budget; things you think will occur “just this once”, but in reality a few items a year fall into this “one time” category. This is a common retirement mistake.
Since these items aren't included in your regular monthly expense list they get left out, potentially ruining your retirement plan.
Below are the seven expense items people most frequently leave out of their retirement budget.
1. Health Insurance/Medical Expenses
If you retire before age 65, the good news is you can buy insurance through the Health Exchange Marketplace. The bad news: be prepared to pay a hefty premium until you are able to apply for Medicare benefits (age 65). If you want a low deductible, for a single person premiums can run around $5,000 to $6,000 per year. Double that number for a married couple. If you are willing to accept a higher deductible, your premiums will be lower. You also need to make sure your retirement budget includes expenses such as over the counter items, insurance deductibles, co-pays, and vision and dental expenses.
Money for travel and fun needs to be included in your budget. Trips don't pay for themselves. Allowances for these items will vary, but if you are used to taking one vacation a year before you retire, plan on including that in your retirement budget as well.
If you are used to paying for trips and travel out of bonuses, it can be easy to forget to include these expenses in your post-work budget. Travel may slow down over the years, but during the first 10-15 years of retirement plan on spending about as much on travel, or more, as you did in the years before retirement.
3. Life Insurance & Long Term Care Insurance
These bills can easily get left out of a budget if you pay premiums annually. Unless you don't need the policy any longer you must pay these premiums and account for the expense in your budget. Over time, long term care premiums may rise, so it is best to plan that this expense will go up over time.
4. New Vehicles
Your current vehicle is probably not going to last throughout your retirement. Whether you pay cash or finance and have a monthly payment, at some point you will have an expense for a new vehicle (or expenses for comparable transportation costs). Many retirees, especially those who have no loans on their cars, forget to account for this periodic expense when they run their retirement plan.
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5. Home & Auto Repairs
As much as we wish our dishwasher, refrigerator, microwave, washer & dryer, heater and air conditioner would last forever, they won't. Fixing or replacing appliances every so often, replacing tires & fixing other car parts, getting a new outdoor furniture set, updating your mattress (and maybe even bed), and when technology advances, replacing computers, printers, and TVs will happen at some point.
These items are notoriously absent from most retirement budgets. The best way to budget for these items: set aside a monthly amount to go directly into a savings account that you can dip into when these “unexpected” expected expenses occur.
6. Gifts and Charity
For some gift giving occurs only once or twice a year. For others it is weekly. Either way, if you would like to continue giving at the same pace, then be sure to account for gifts, charitable donations and tithing in your retirement budget.
7. Adult Children/Grandchildren
More and more I see adult children borrowing money from parents. As a parent I know that this ‘borrowing’ will likely never be repaid. If you don’t account for this in your retirement budget, or make other adjustments in your own lifestyle, you can get yourself in trouble.
Many couples retire with a solid retirement plan, then their children get in trouble and they understandably start doling out assistance. Soon they end up in a situation where they are about to run out of money themselves. Helping out the kids is fine, but you will have to make adjustments in your budget to account for this extra expense.