How to Estimate Retirement Expenses
Retirement can be a time of rest and relaxation, but for some people it can be a time of financial stress. It's important to start estimating retirement expenses early, so you can enjoy your retirement years with less worry.
What are the average expenses for retirees?
Retirement planning is important for anyone, but it is especially important for those who will no longer have income from a typical job. There are a number of expenses retirees face, such as health care costs, transportation costs and taxes.
The American Association of Retired Persons (AARP) released a report in 2016 that found the average expenses for retirees were $16,000 per year. This figure includes both basic needs like groceries, utilities and additional expenses like travel and entertainment. Another AARP report from 2021 found that on average 65 year old couples will also need about $220,000 just to cover health care costs for 20 years of retirement.
How can you estimate your own retirement expenses?
When estimating retirement expenses, you must figure out how much money you will need to save each year for that future. This will require estimating your annual income, retirement age and the rate of inflation. Once you have these figures, you can start calculating how much money you need to save each year.
How can you reduce these expenses?
Once you have estimated your annual expenses, you can begin to reduce these costs by finding ways to cut back on your spending. For example, if you are spending more than half of your monthly income on housing costs, try living in a cheaper area or renting instead of buying. If you are eating out frequently, try cooking at home more often or finding cheaper restaurants.
What other steps should you take to prepare for retirement?
It is important to start planning for retirement as early as possible to have enough money saved. There are a number of things that you can do to help prepare for retirement, including contributing to a 401(k) or IRA account or growing your investment portfolio. It is also important to make sure that you are aware of your Social Security benefits eligibility and how much they will be worth when you retire. Finally, make sure that you have a plan for when you retire, including figuring out where you would like to live and what kind of lifestyle you would like to maintain.
Start saving now
By estimating your own expenses and taking steps to prepare, you can help ensure an enjoyable retirement. Contact the office today for more information.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.