When you are approaching retirement, everything that you have to prepare may seem a little overwhelming. You’re lifestyle is going to change dramatically, and so are your income and expenses.

On Wednesday, David Ning had a post over at U.S. New – Money entitled “5 Retirement Expenses Many People Forget.” We thought it was a great look at some things many new retirees may not consider until it’s too late to plan for. Here are our favorite points:

  • “Some expenses will disappear. Speaking of mortgages, these debts, like every other, are meant to be paid off. This means that not only will the payment stay the same as long as you have a fixed rate, but you don’t have to account for the expense indefinitely either.”

Our comment – It’s best to go into retirement as debt free as possible. The loss of income you’ll be facing will be all that much more daunting with the worry of a major mortgage or credit card payment. Try to pay down as much of your debt as possible while you are still working.

  • “There are still taxes in retirement. Many people will still need to file a tax return in retirement, even though they don’t receive a regular paycheck anymore. Social Security, pensions, IRA and 401(k) withdrawals, and gains when you sell your investments are all taxable at different rates. Taxes can be one of the biggest retirement expenses, so make sure to include them in your retirement budget.”

Our comment – Even if your income has dramatically decreased, your tax situation may become more complicated in retirement due to all the different sources of income you will receive. Consider hiring a tax advisor to help you navigate your retirement taxes, at least for the first few years. And remember to consider the cost of an advisor when planning your expenses!

  •  “Lifestyle changes will lead to different types of expenses. Think about how you will spend your time in retirement and how your expenses will change. You will no longer commute to work, so you might save some money on gas. But you could pick up a hobby that requires new equipment or go out more for dinner because you have more time on your hands. Many people account for travel in their retirement budget, but not everybody remembers to factor in extra movie costs because of the newfound free time.”

Our comment – It’s important to control your spending while in retirement and living on a reduced, often fixed, income. When you are accounting for the extra money spent eating out and going to the movies, don’t forget to compare those expenditures to your other expenses so you don’t exceed your income.

 

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.
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