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How expenses can change
during retirement
ork is a major component
of daily life, so much so that
WAndrew Naber, an industrial
and organizational psychologist and
an associate behavioral scientist at
RAND Corp., determined that the
average person spends 90,000 hours
at work over the course of his or her
lifetime.According to a 2014 Gallup
poll, the average American retires
at age 62, but roughly 64 percent
of professionals bid farewell to the
workplace between ages 55 and 65.
Retirees must make a number
of adjustments once they call it a
career. No such adjustment is as
significant as the financial one. Most
people find their post-retirement
income is considerably less than
when they were working full-time.
That is why financial planners often
recommend saving and investing
enough during working years to
be able to replace 80 percent
of preretirement income. Certain
expenses get lower after retirement,
but some will rise. Here’s a look at
what to expect when the bills come
due during retirement.
• Food costs: Food costs may
go down in retirement because
shopping and preparing meals for
one or two people is much less costly
than feeding a family of four or more.
However, dining out may increase as
you have more free time to visit local
eateries.
• Automotive costs: According to
data from the U.S. Department
of Transportation, the average
commuter spends 25.8 minutes
behind the wheel twice a day, and
the average driver puts in 13,474 miles
behind the wheel each year — with
people between the ages of 35 and 54
clocking close to 15,000 miles. Less time
spent in the car means fewer gasoline
fill-ups and longer durations between
oil changes and other services.
In addition, based on the Internal
Revenue Service reimbursement rate of
58 cents per mile, a typical commute
of 20 to 30 miles a day costs $11 to $16
a day or $55 to $80 a week. In a year,
you could easily be spending $2,000
to $4,000 a year commuting if you
live within 15 miles of your job.Without
commuting, that cash stays in your
pocket.
• Taxes: Many people can expect to
be done paying federal income taxes
when they are retired and no longer
earning an income. If the majority of
retirement savings were in Roth IRA
accounts, contributions are available
for withdrawal tax- and penalty-free at
any age.
• Housing: Your mortgage may
be paid off before or soon after
retirement.That eliminates the single
largest expense in many people’s
budgets. If your home will not be
paid off, it’s possible to downsize to
reduce monthly payments.
• Travel: While many other expenses
can go down, travel is one expense
that can shoot up during retirement.
But many people are happy to bear
this cost.With more time for travel,
retirees may allocate more funds
toward vacations and other great
escapes.
• Health care: Seniors often see their
health care needs and costs go
up after retirement. It’s important The Morning Call
to understand what is covered
by health plans, and it’s equally |
important to set money aside for
unforeseen medical expenses.
Many costs of living decrease after
retirement. However, it is wise to take Sunday, April 24, 2022
in the whole picture to understand
how to budget for retirement.
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