7 Expenses That Vanish During Retirement

×
Close-up of a senior couple smiling
Getty Images
By Robert Berger

How much money will you need in retirement? It's one of the toughest estimates to make in retirement planning. It's so difficult, in fact, that many people use a rule of thumb, such as 70 percent of pre-retirement income, rather than even trying to guess.

For those who love a challenge, however, estimating retirement expenses can lead to more precise planning. The good news is there are some expenses that disappear during retirement. Some vanish immediately, while others tend to diminish as we move deeper into our golden years. Here are seven expenses you might be able to eliminate in retirement:

1. Retirement savings. While not exactly an expense, retirement savings should account for a significant part of a monthly budget during our working years. For those socking away 10 to 15 percent of their paycheck, this one item alone can account for a significant reduction in retirement expenses.

2. Mortgage. A worthy goal is to retire your mortgage by the time you retire. While everyone doesn't achieve this goal, those who plan to pay off the mortgage can reduce their monthly expenses by a fair amount. Keep in mind, however, that paying off a mortgage does not relieve the homeowner of all costs, such as taxes and insurance. In addition, for those who itemize their taxes, take-home pay will be less without the mortgage interest deduction.

3. Commuting. From gas to car maintenance to parking, retirees can save a lot of money while avoiding the daily grind. Those who work in congested cities can often save the most. A weekend visit to New York City earlier this month reminded me of just how much some people pay for a spot in a parking garage.

4. Life insurance. Most retirees do not need life insurance.
While there are exceptions, life insurance is typically to replace the income the deceased would have earned for the benefit of dependents. By the time most people reach retirement age, they are no longer supporting dependents with their income. For those who want a small policy to pay for funeral costs, these can be found relatively inexpensively.

5. Family expenses. It costs a lot of money to raise a family. Just clothing, feeding and transporting a family of four puts a big dent in a monthly budget. Add to that the cost of car insurance for teenagers and a college education, and family expenses can easily become one of the largest household expense items. These costs fade away over time, however, and should be completely out of the budget by the time most people retire.

6. Payroll taxes. Payroll taxes are easy to forget until you take a close look at your pay stub. Social Security taxes cost workers 6.2 percent of their pay, up to an annual limit of $113,700 for 2013. Then there is the Medicare tax of 1.45 percent with no limit. And there is another 0.9 percent Medicare tax for those making over $200,000 ($250,000 for couples). Of course, without earned income, these payroll taxes go away in retirement.

7. Second car. For many retired couples, there is less of a need for a second car. Moving to one car saves on everything from a car payment to insurance to maintenance. While many couples may keep two cars when they first retire, it's not unusual for retirees to eventually get by with just one vehicle.

Rob Berger is an attorney and founder of the popular personal finance and investing blog, doughroller.net. He is also the editor of the Dough Roller Weekly Newsletter, a free newsletter covering all aspects of personal finance and investing.


More from U.S. News:


Increase your money and finance knowledge from home

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum

35 Comments

Filter by:
r_womer

Reverse Mortgage Loans can be the solution to retirement; it is specifically designed to help homeowners over the age of 62.

http://www.reversemortgagelendersdirect.com/reverse-mortgages-pros-and-cons/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-rates/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-loan/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-myths/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-calculator/
http://www.reversemortgagelendersdirect.com/reverse-mortgages-how-they-work/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-information/
http://www.reversemortgagelendersdirect.com/who-qualifies-for-a-reverse-mortgage/

November 28 2013 at 2:39 PM Report abuse rate up rate down Reply
mrpak5604

qtgoldeneyes I I only have one comment, I hope some idiot can provide you with a water front cottage.

November 12 2013 at 9:53 PM Report abuse rate up rate down Reply
Susan

well just think , I'm 53 and can't work again due to my illness. Some days are better then others but thank God my hubby works . Lost my income, Insurance , and a lot more . But life goes on.

November 12 2013 at 10:55 AM Report abuse rate up rate down Reply
qtgoldeneyes

Retirement when forced on you due to heath or death which I myself am going thru stinks, I do not have the money to live like a human I can only do with what I have and that is not much it seems that everyone has their hand out , the city the state the government the IRS the undertaker the banks and even 411 now it costs for a lost friends telephone #. After 37 years of marriage my husband who was very sick then passed away leaving me with so very much of nothing but debt which I have paid off with my savings. He had no insurance when I thouth he had but was never told otherwise. Rigt now all I want is a small year round cottage on or near water the will be safe, cozy, and warm all of whitch I can not afford the lonleyness is unbearable. I cannot drive my car because I now have no garage or driveway to put it because I park on the street and if I leave my spot I might have one when I return home , home a big drafty freezing cold apex that costs me way too much to rent/without utls. If I sound as if I am crying in my beer I am shame on me right I think I can if I want. Ladies make sure you have insurance and a will or you will be as , well you know the word as me..In the end nobody wants anything to do with you and if they do they want something from you kindness flys out the window I have been taken by friends and family. Please forgive me I am not as bitter as I sound just really hurt and sad,, I will survive I am strong , I just don"t want to give up.. Make sure you look out for yourself because no one else will do what is in your best interest.

November 09 2013 at 7:17 PM Report abuse rate up rate down Reply
1 reply to qtgoldeneyes's comment
Bryan Citrowkse

You dont sound very strong though

November 12 2013 at 3:53 PM Report abuse rate up rate down Reply
Hi Den

Item 2. Just remember, you never really own your home, the government does. Stop paying your taxes and you will find out who owns it.

November 09 2013 at 11:42 AM Report abuse rate up rate down Reply
MsPatt

I think that unless/until one just cannot for one reason or another drive any longer, a couple isn't going to give up one of their automobiles. I know I'm not willing to give mine up, & he's not giving up his truck!

November 07 2013 at 11:34 AM Report abuse +1 rate up rate down Reply
bhtxd004

other expenses that go away, dental, hair care, condoms, latest fashions, new electronics, sports gear, but are replaced with poligrip, hair club, toys,goodwill, cable, orthopedic shoes

November 06 2013 at 11:32 PM Report abuse +1 rate up rate down Reply
John

An article written by a person years away from retiring. Reality is far far different.

November 06 2013 at 11:14 PM Report abuse +2 rate up rate down Reply
rm42749

Stupid article.

November 06 2013 at 10:46 PM Report abuse rate up rate down Reply
riognach

Some of us want to continue working and are required to continue into advanced degrees to do so. A PhD is expensive to pay off, and if I stopped working tomorrow, I'd still owe another 20 K on mine. Education expenses frequently do NOT go away.

November 06 2013 at 8:32 PM Report abuse -3 rate up rate down Reply