Everyone wants to retire eventually. After years of working hard to provide for themselves and a family — spending day in and day out at a job making as much money as you can in order to pay bills and keep your head above water — the end goal for most Americans is a nice retirement account or pension that they can live off of without having to work.
It’s been widely accepted years among financial advisers that in order to live comfortably in retirement, you’ll need a fixed percentage of your previous income. Many advisers believe that somewhere around 80 percent is reasonable, but it’s typically more complicated and involved than that. To really get a picture of what you’ll need in order to retire, you need to take a lot into consideration.
The Biggest Expenses
There are a number of costs associated with retiring, but perhaps none more burdening than housing costs. Housing costs reportedly average around $14,000 annually among people 65 and older — $5,000 for owned property versus $1,800 for rented property. Utilities typically cost retirees around $3,400 per year.
Other costs, like mortgage interest and charges, insurance and property taxes also weigh heavily on a retiree’s living.
It’s not only fixed expenses you’ll have to consider, but also average expenses and ideal expenses, not to mention leaving some room for spending and luxuries. You’ll still need things like an emergency fund for unforeseen expenses like car repairs, and it’s always important to save some money. Factoring all this in, you’ll need to leave a significant amount of buffer in your calculations for retirement living expenses. Yes, lots to consider to retire.
Food And Health
When calculating your retirement expenses, you’ll need to factor in a budget for food. Retirees 65 years and older typically spend an average of $5,126 annually on food, with almost $3,500 of it being spent on groceries like meat, eggs, vegetables and fruits. Retirees also spend around $1,825 on average eating outside of the home. There are many restaurants that offer senior discounts, which make it easier for those on fixed incomes after retiring.
Healthcare is an entirely different animal, as the costs can change in cases of illness. On average, retirees spend around $5,000 annually on healthcare expenses including insurance, drugs, supplies and devices. Don’t forget deductibles, copays and other healthcare expenses that can fluctuate depending on circumstance.
Keep Track Of Your Expenses
It might seem like a daunting task to keep track of all the various expenses you’ll have as a retiree, but the best way to do this and be well-prepared is to keep track of your expenses for a year before retiring. This way, you’ll be living a retirement-like lifestyle without actually retiring. There are several tools you can use to help you keep track of your expenses, including websites like mint.com and desktop software like Quicken.
As long as you calculate your expenses properly and leave room for savings and emergencies, you should find yourself in a position where you’re prepared to take on retirement and live comfortably no matter how much you need to live on.