The Notion That You'll Spend Less in Retirement Is Totally Wrong

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the notion that you'll spend less in retirement is totally wrongBy Jill Krasny

People approaching retirement like to think they'll spend less when they hang up their hat, but the reality might be a lot different than that, at least according to the researchers at Bernstein Global Wealth Management.

In Daniel B. Eagan's opinion, the idea that you'll spend less in retirement might be the biggest misconception there is.

"It's hardly ever true, though retirees truly believe it," he told Business Insider. "Retirees end up spending even more until they're really old and then they're home-bound."

Take a look at some of the factors driving their costs up:

The rising costs of healthcare: Medical costs have cast a long shadow over retirement, according to a spring report from Fidelity Investments, and it's only going to get worse. "A 65-year-old couple retiring this year without any employer-based health coverage would need an estimated $240,000 to cover medical costs through retirement," wrote Lee Adler. That's not even accounting for complications like Alzheimer's. Currently, Americans spend $2.8 trillion on health care each year.

Supporting millennial kids: Whether it's helping with student loan debt or putting the down payment for their child's first home, more retirees are financing relatives' lives in some way. According to the National Association of Realtors' "Profile of Home Buyers and Sellers," 26 percent of first-time homebuyers received cash for a down payment from a relative or friend. Others went so far as to take on their child's entire mortgage.

Funding a grandchild's education: Grandparent spending skyrocketed between 1999 and 2009, according to Met Life, and it's a trend that will likely continue. In 2009, grandparents said they spent $2.43 billion on primary and secondary school tuition and supplies, three times more than they did a decade prior.


Taking vacation: Unless they're seasoned travelers, we doubt most retirees will try to cut corners when they're planning some overdue beach time. Yet these expenses can quickly add up, especially when consumers don't pay attention. As we've reported before, all-inclusive cruises are riddled with fees, from cocktails to off-shore excursions, and let's be honest: traveling abroad hasn't gotten much cheaper. International fares can easily edge into the thousands.

Filling idle time: "Believing it'll cost less not to commute to work, that you won't be eating out as much, and will stay home and garden is just wrong," said Eagan, the wealth researcher. "These are smaller things compared to the larger items, like travel and healthcare. You'll also have more time on your hands that you'll want to fill with pleasure." And that pleasure will cost you to the tune of $57 a month, according to MainStreet.

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Grant Webb with Bisk

While it sounds like a nice idea to retire and reduce the amount of money one spends, but the fact of the matter is that as a retired individual or retired couple, now you have more opportunities to spend since you are not occupied. Though spending is something that will be done in order to survive, people can invest in a way that does not restrict their spending habits. A great resource article is www.cpaexam.com/power-investing/

The article discusses the rationale behind investing with the expertise of both a licensed financial advisor and a CPA. Hopefully this helps. Lets not be the generation that cannot afford to retire.

Grant

September 14 2012 at 3:31 PM Report abuse rate up rate down Reply
Fed up Senior

That is total bull. This person obviously is getting her info from people who did not plan for retirement. If you pay off you home, cars, credit cards AND prepare your home for maintainence free living, you can spend a lot less money. Some of the areas of savings are commutation expense, lunches, business/work clothes, dry cleaning, taxes, retirement accounts that you no longer need to fund. We are retired, making far less money, but are spending far less than we get in pension, SS, and asset appreciation.

September 05 2012 at 10:03 AM Report abuse rate up rate down Reply
pdbliz

Democrates,,,why do you kill so many unborn children.??????
Democrates,,,why do you hate GOD.??????
Democrates,,Why are you race bateing ,,,blacks against whites,,,,,,?????
Democrates,,,,,did you know,,,,the KKK was started by Democrates,,,,,google,,,Democrate KKK..
READ IT FOR YOURSELF.!!!!!!!

August 31 2012 at 9:33 PM Report abuse -3 rate up rate down Reply
3 replies to pdbliz's comment
pdbliz

AOL.........I am sick of all your obama support,,,,AOL.....start telling the truth to all people.!!!!!!
AOL.....be equal to all ...not just one.!!!!! I would expect this from msnbc.....abc...cbs.......but,,,,not from AOL...
AOL.......TELL THE TRUTH,,,OR GET OUT.!!!!!!!!!!!!

August 31 2012 at 9:31 PM Report abuse -6 rate up rate down Reply
1 reply to pdbliz's comment
MONTOOTH

Again, if you are going to comment, at least direct your comments to the content of the article. BTW: you will find a good balance between so-called liberal and conservative news and information on AOL, because they get their "news" from the mainstream news and information outlets. AOL does not make the news, they only disseminate it.

August 31 2012 at 10:20 PM Report abuse +4 rate up rate down Reply
ribaudomarty

Total nonsence, its about what you need to live on. If you have no mortgage, car loans or credit card bills, its possible to live comfortably on less than half of what you used to make. Its simple math, what's comming in and what needs to go out. Scare tactics are the rage for investment houses, don't buy into it.

August 31 2012 at 9:17 PM Report abuse +2 rate up rate down Reply
billybuttlooker

WISH WE GOT WHAT THEY GET IN CONGRESS

August 31 2012 at 7:24 PM Report abuse +1 rate up rate down Reply
Kay

not true. I do spend less now that I'm retired! My income was cut in half so I have to spend less. Plus I don't have to buy gas to go to work 5 or 6 days a week and I sure do eat differently and as for travel, I don't do that very often either unless it is a short trip to somewhere close by. Not only all of this, but I have to pay for part of my health insurance and that goes up every year so my retirement check keeps going down. Facts of Life for me.

August 31 2012 at 6:18 PM Report abuse +1 rate up rate down Reply
Pauline or Don

How to retire comfortably? Pay off your home, cars and credit cards! It can be done if you live modestly. Had new cars during our lifetime but was not interested in having more house than we could afford. Never worked for a company that had a pension, middle income wages, but started investing at age 35, with stocks and mutual funds. Live modestly in retirement now but enjoy lunches and occasional dinners out, community theater, classes for artistic pursuit, visiting grand kids, and looking forward to an upcoming cruise. Health care is a big nut but we are managing! What really helps is having a home based business of some sort! You get to write off all expenses against your income and the extra money helps for those little pleasures!

August 31 2012 at 5:50 PM Report abuse +1 rate up rate down Reply
George

My Children say spend all of your retirement.......They say we don't need any of your retirement I clear a little bit over $60,000 yearly..... In my 85 years I don't have a penny saved. I believe I can't take it with me anyway

August 31 2012 at 5:09 PM Report abuse rate up rate down Reply
FRAN AND MARTY

We retired in Jan and are amazed at how much we save! Read Dave Ramsey's book NOW and plan and save. It's suprising how much you don't need right now. We Americans are fooled into buying for pleasure. Jill obviously is a spender and got her info from chronic spenders.

August 31 2012 at 4:08 PM Report abuse +1 rate up rate down Reply