Ups and Downs of Retirement Expenses: What Do You Need?

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We loathe calculators in our household -- because we only use them when we have to figure out what large sum of money we need to save to accomplish a goal. And when we recently decided to calculate how much we'd need to save for retirement, we thought our trusty electronic device was broken when it spit out a seven-digit number. We ran the numbers a second time and sure enough, the result still topped $1 million.

After collecting ourselves and analyzing the numbers a little more closely, reality began to set in. Living for 25 years with only your only outside income being a small stipend from Social Security requires a huge chunk of savings.

When it comes to understanding why retirement is so costly, my husband and I like to think of it this way: How much money do we need to get by in a month? Then we take that number and multiply it by 12, which is how much we'll need over a year. Finally, we multiply that number by 25 (supposing our retirement lasts from age 65 to age 90), and that's roughly how much we'll need for retirement -- without factoring in inflation on the one hand, or investment growth on the other.

Some Expenses Will Decline

While there's no question we'll need a large nest egg to survive (let alone thrive) in retirement, some of the expenses we have today may no longer be a factor once age 65 rolls around for us. It's important to keep these in mind so we don't overestimate how much we'll need come retirement age.
  • Mortgage: Most Americans have paid off their mortgages by age 65. If you haven't kissed your mortgage goodbye and don't own your home outright, then you'll want to factor in more money to help you get to that point. But if your countdown until tear-up-the-mortgage day is on track to arrive before your retirement date, that's a big monthly bill you can cross off your planned expense list.
  • Child-related expenses: From the cost of back-to-school shopping to keeping a growing teenager clothed and fed, the costs of raising children will likely no longer be a part of your budget.
  • Food and entertainment: Although you'll still be out and about, the rate at which you go and do is likely to slow down some as your retirement progresses. You'll have fewer mouths to feed, and extravagant nights out may also lessen. And if you're still living on a budget, this is an easy category to put on the chopping block when times get tight.
  • Taxes: Because of your retirement status, your tax bill could dip significantly. While a large chunk of your earnings go to taxes right now, you'll probably be giving substantially less to Uncle Sam once you leave the workforce, especially if you've been putting money into investments that have tax-free disbursements in retirement, such as a Roth IRA or Roth 401(k).
Other Expenses Will Go Up

Overall, your day-to-day lifestyle will likely cost less than it currently does. Your life should be more settled and simplified, and fewer unexpected expenses should pop up. And while most of your spending will continue going to everyday living expenses, as mentioned above, there are a few new things you'll want to save for in retirement.
  • Health care: One major expense worth factoring into your budget is the possibility you'll need long-term care in-home care, or assisted living. At some point in retirement, those possibilities have a strong likelihood of becoming your expensive reality. According to a recent study, half of all people who buy a long-term care policy at age 60 (of the type that pays out immediately for eligible claims) will at some point use that policy.
  • Adult children needing financial help: You'll want to decide in advance what to do in the case that your adult offspring need help financially. If you do have some extra retirement savings, you may have opportunities to help them when they're in a financial pinch.
Retirement is no small expense, and it's important to start saving now, and investing that money in ways that will grow our money over time -- hopefully, faster than inflation eats away at it. When it comes down to it, we can't know the exact number we're going to need for retirement. But we do know that we're going to try to save as much as we can.


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36 Comments

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Patty Coleman

Planning for retirement is one of the key in having a comfortable and financially stable life after retirement. It's true that there are some expenses that will decline such as your mortgage, taxes and expenses concerning your children but other expenses will arise. This goes to show that planning ahead and making sure that you will not outlive your retirement income are imperative.

Experts say that around 70% of people who are 65 and above will require long-term care which is expensive in nature. Its cost is also steadily increasing, the reason why people should consider buying long-term care insurance. Long term care insurance policy is described by http://www.freeltcquotes.com/long-term-care-insurance/ as an insurance product that covers assisted living facilities, nursing home, home care, adult day care and other facilities. This is a good option in paying for your future care needs but there are also other ways to handle your expenses like life insurance and through government programs.

If you want to have the peace of mind, protect your nest egg and spare your family from caregiving responsibilities, it's recommended to buy long-term care insurance.

Saturday at 3:31 AM Report abuse rate up rate down Reply
Stephen

Those folk who are retiring and are concerned about either maintaining their "current" way of life or improving on it during their retirement years… are failing to take into consideration the fact that their life will greatly slow down during those years, and the need for a significant income will be greatly reduced. I can assure you that after being retired for 10 years, your costs and interest in certain activities will greatly diminish over what it was when you initially retired.

July 20 2014 at 7:43 AM Report abuse rate up rate down Reply
mrsperlosi

teabuster2

It's the party of plutocracy who wants to give the working person less so that the 1% can take more.

+++++++++++++++++++++++++

First of all Somey for you to post a remark like that you should first have a job. It is about time you stop expecting others to pay your way dear. And secondly rich people like President Obama and the rest of us rich liberals are always looking for ways to steal more out of the pockets of the working people in the form of tax increases darling.

July 11 2014 at 10:01 AM Report abuse rate up rate down Reply
elaineen

After reading a bunch of misogynist comments I realize how lucky I am to have married my wife. We just went out to dinner at a local Mexican place and the bill was $11.00. My wife loves the place. This morning I realized our kitchen breakfast set bench had a crack and replacing it would cost $60-100 dollars. My wife suggested I try to fix it. I bought some wood dough and will tackle the project this weekend. We are retired and debtless. Thank God I married a cheapskate.

July 11 2014 at 1:28 AM Report abuse +3 rate up rate down Reply
militiaman2013

Unfortunately the 1% have answered this problematic question and the y along with media ask such stupid questions when:

Companies like Boeing, Ford and GM no longer pay livable wages and hire people who only need enough income for their next drug fix and produce millions of junk cars that kill people.

Additionally, these companies have eliminated pensions so the dead head workforce no longer has a retirement or a future.

And to make matters worse our pathetic failure of a Government has just let 50,000 illegals into our country so they can set up Marijuana stores just as the Arabs have with all of our gas stations.

I urge everyone with a gun and a backbone to join on the Border to do the job our Federal Government has failed to do: Protect the legal Citizens of the united States.

July 10 2014 at 5:33 PM Report abuse +3 rate up rate down Reply
1 reply to militiaman2013's comment
mac2jr

Thank you, a voice that displays what is totally wrong with this country, you....

July 11 2014 at 1:38 AM Report abuse -3 rate up rate down Reply
2 replies to mac2jr's comment
militiaman2013

Got stick it where the sun don't shine you Commi

July 11 2014 at 2:27 AM Report abuse +2 rate up rate down
mrsperlosi

Mac darling people like you are what is wrong with this country dear. Perhaps instead of posting your nonsense day after day you should get off your duff, go purchase a one way plane ticket and go somewhere where you will be happy darling. Perhaps a nice communist country would be better suited for you doll.

July 11 2014 at 9:55 AM Report abuse rate up rate down
energysageinterns

One lucrative yet often overlooked retirement strategy is investing in a home solar PV system. It's actually an incredibly low-risk/high-reward investment that will save you more and more money over time, will raise your home value, and can even be a source of income. Check out this blog to see how solar energy can work as a retirement plan for you - http://bit.ly/11CqJ2H

July 10 2014 at 4:49 PM Report abuse -4 rate up rate down Reply
1 reply to energysageinterns's comment
mac2jr

Thank you, a voice of reason...

July 11 2014 at 1:38 AM Report abuse -4 rate up rate down Reply
1 reply to mac2jr's comment
mrsperlosi

Oh my, and you are the authority on what is a voice of reason? I hardly think so dear.

July 11 2014 at 9:56 AM Report abuse rate up rate down
SPQR

Get job with the government preferably run for office and you will never have to worry about retirement

July 10 2014 at 3:36 PM Report abuse +2 rate up rate down Reply
SPQR

#1. Don't date if you are single. Women are spendthrifts and will get you to spend everything you have. It is easy to spend hundreds on just one date. If they get you to marry them they want a new car and a million dollar home with granite countertops and stainless steel toilets. They never can have enough. They get bored and want a stable of horses, pool boys etc

#2.

July 10 2014 at 3:33 PM Report abuse +3 rate up rate down Reply
Tuffyrascal

What if you don't have anything to save with because you were disabled since you were a teen and all you have is disability money to live on?

July 10 2014 at 2:40 PM Report abuse +1 rate up rate down Reply
mac2jr

"key to retiring successfully "

A) Do not get married.

B) Do not have children

C) If you do marry, Do NOT Divorce..

D) If you do divorce, stay out of the Court System

July 10 2014 at 2:34 PM Report abuse +5 rate up rate down Reply
2 replies to mac2jr's comment
militiaman2013

Easier said than done the whorezz are all trained to run to the court and collect their free ride. Husbands should invoke "until death do us part" and start standing up for themselves since this is the lively hood of Judges who survive on hand outs from the Attorney's who act as pimps after the fact. Until a credible threat faces the Judges and Attorneys who run this mafia like business of divorce it will never end in favor of a man.

July 10 2014 at 5:27 PM Report abuse +2 rate up rate down Reply
ted_wilson7

A) Do not get married.******* Yeah, that's working well for the black population…..

July 10 2014 at 6:42 PM Report abuse +5 rate up rate down Reply
1 reply to ted_wilson7's comment
militiaman2013

Yeah remember the Judge who had to order the black dude with 22 known children to stop having kids until he can pay for them. This is also why the white guys are hit so hard, they have to make up the difference for the master minority who never pays.

July 10 2014 at 7:11 PM Report abuse +4 rate up rate down