You can expect your living expenses to change significantly when you retire. Some will almost certainly shrink, but others are equally likely to go up. Planning effectively for your financial future includes anticipating those changes.
What costs less in retirement:
By the time you
retire, you’ll probably have paid off your
mortgage.
There’s a good
chance you’ll have finished paying for your
children’s educations.
Your work-related
expenses are likely to decrease. You’ll probably
spend less on day-to-day travel, restaurant meals,
clothes, and visits to the dry cleaner.
You
may need only one car, which means you’ll save
on car insurance payments, maintenance, and gas.
What
costs more in retirement:
Medical expenses,
including the cost of insurance, often increase considerably
in retirement. For example, premiums for Medicare, Medicare Supplement, and Drug Coverage can easily cost $3,000 a year before deductibles, co-payments, or co-insurance. In some cases, it’s substantially more.
Home maintenance
costs and property taxes tend to go up, not down,
over time, unless you move to a smaller place or
to a state with lower taxes.
Home and car insurance
are apt to increase.
You may pay higher
utility bills if you spend more time at home.
