It’s not uncommon for people to reflect on their retirement, but not think about the expenses they will have to meet with when they retire. Consequently, they don’t save or invest enough for retirement.
Let’s take a closer look at some statistical costs and then we will cover some basic financial strategies to help you meet them.
Retirement Expenses
When it comes to retirement expenses, many people tend to overlook funeral costs. It’s understandable, of course, because we would rather think of anything else rather than our mortality. However, if you don’t think about this expense and plan for it, your family will have to come up with $7,000 to $10,000 as soon as you pass away to cover the cost of funeral and memorial costs. An effective way to plan well ahead of time is to buy final expense insurance. While there are other solutions, like getting life insurance, this type of policy is the most affordable. Companies like PolicyZip can help you figure out what is best for your situation.
Other expenses you will have to meet are housing, transportation, food, and healthcare. Assuming you will be retiring at age 65 years or older, then according to the Bureau of Labor Statistics (BLS), your annual expenses for housing will be about $15,838, for transportation will be about $8,338, for food will be about $6,303, and for healthcare will be about $5,956.
Steps to Take to Manage these Expenses
- Managing Funeral Expenses
How do you get final insurance? Speak with an independent insurance agent. They will explain the different plans. After you find a plan you like and sign up, you’ll assign a beneficiary.
You will be able to adjust the plan over the years should it become necessary to account for inflation and other factors that could affect how well your expenses will be covered.
- Managing Health Care Expenses.
If you retire without health coverage, either because you didn’t have regular employment or lost your job-based health plan, then you should buy a plan from the Health Insurance Marketplace.
If you have retiree health benefits, then you’re covered. However, if, for one reason or another, you’re not satisfied with it, you can always replace it with a Marketplace plan.
- Managing Other Expenses
Your other expenses, like housing, transportation, and food can be handled by using basic financial management techniques.
- Start a budget. Although it’s a tedious process keeping track of the inflow and outflow of your money, it’s one of the most reliable ways to avoid accidentally overspending. The best time to start a budget, either using an Excel spreadsheet or a money-management software program, is now so that you get into the habit of budgeting before you retire. Starting early will also allow you to plan your savings and investments better.
- Speak to a retirement financial planner: It’s always a good idea to get a second opinion on how you should save and invest for retirement. Working with a financial expert will help you stay on track with how well you’re doing with your retirement planning.
Why Plan Ahead
Although thinking about future expenses is difficult, perhaps even depressing, because the future is somewhat ambiguous, it’s necessary to ensure that you have a comfortable retirement. It’s easy enough to procrastinate on something in the future, but if you avoid getting around to it, you will not have calculated how much money you will need for your golden years. So, it’s advisable to start thinking of your retirement as early as possible. Some plan is better than no plan at all, and you can always adjust your plan as you get closer to retirement age.
