By far this is the most ambiguous question when working with clients on retirement planning. Everyone is different. Some people plan to be more active in retirement, while others will spend less. The old rules for retirement planning of “70% of current income” simply will not hold true for the baby-boom generation. Studies show that healthcare and housing tend to be the most under-budgeted areas.
When looking at retirement planning needs, budgeting for the cost of healthcare is always one of the first considerations. If retiring before 65, retirees need to budget for covering the cost of insurance until Medicare kicks in. After Medicare takes effect, you may face higher out of pocket costs than when you were covered by private insurance (dependent on the coverage. Long-term care is the other major consideration. The need to cover the cost of nursing home care could be a major threat to retirement savings.
Many people automatically assume that housing cost should be significantly reduced by the time retirement rolls around. Often forgotten in the budget is the cost for maintenance, which usually increases as houses age. As retirees age, the ability to handle the upkeep of your house by yourself can also diminish, requiring you to hire outside help.
On the lower-cost side of the coin, is the fact that transportation expenses generally decrease (no more commuting), and entertainment costs typically are equal to working folks.
While the cost of saving for retirement is gone, typically some continued savings will be necessary for ongoing retirement well-being.
