Financially Planning for Retirement
As you approach retirement in your early-to-mid 60s, you have to address the financial changes that come from ending your career and switching over to living on Social Security and your retirement savings. Not only may your monthly income be drastically different, but your spending will change in retirement as well. It is important to work with a financial professional to plan your retirement budget and to partner with an experienced estate planning attorney to plan for when you pass away and leave your assets to family.
Expenses That May Decreases
As you get older, you can expect certain items to take up less of your budget, including:
- Household: In most cases, your household expenses (including your mortgage, utilities, insurance, and upkeep) go down because you own your home or you downsize to a smaller place. If you plan on staying in your home that you have paid off, you can budget for you living expenses fairly accurately. However, if you anticipate wanting to move or are hoping to move into an assisted living facility, work with your financial advisor to see how this will affect your budget.
- Transportation: It is not always true, but most people drive or commute less once they retire. Instead of driving to and from work every day, you may find yourself staying at home more, saving on gas and vehicle upkeep. However, if you think you will be taking more trips once you retire, speak with your financial advisor about budgeting for these. Part of your transportation budget may shift from in-town travel to airfare.
- Entertainment: You may assume that since you are retired and have more time on your hands that your entertainment budget will need to adjust upward. However, this is not the case for most people. Unless you decide to take up a new hobby in retirement, this portion of your budget may stay relatively the same or decrease. Also, many retirees spend a lot of time with friends and family, which does not require going out and spending money.
If you are worried about your expenses on your retirement income, there are ways to help your budget. Designating essential versus nonessential expenses is crucial. For instance, food, household, and transportation are essential. However, eating out, a cleaning service, or cable TV are not essential.
Expenses That May Increase
As you get older, some things simply become more expensive or require a greater portion of your income. Some of these items include:
- Travel: If you are ready to jet set around the world or consistently visit family in other parts of the country, then your budget for airfare, rental cars, and hotels will need to go up.
- Medical care: This is the one category within your budget that is highly likely to increase – and it may do so dramatically. After retirement, you are more likely to have health problems, see the doctor more often, need to take prescription medications, and require assistance at home. While you will have Medicare to help you with your healthcare expenses, you may still have premiums. Medicare Part A does not have a premium, but Medicare Part B and Part D do. You will also have expenses that are not covered by Medicare at all, like glasses.
- Long-term care: In addition to your everyday healthcare expenses, you may need to plan for long-term care, such as in-home assistance or an assisted living facility. It is not necessary pleasant to think about, but there may come a time when you cannot take care of yourself or live alone. Talk with your family members and then your financial advisor about these plans.
Planning for your retirement or when you pass away are difficult tasks. However, it helps you to have professionals like an experienced estate planning attorney on your side. A lawyer and financial advisor can help you understand your rights and plan for the future. Don’t hesitate to contact West Palm Beach attorney Larry Bray for help with your case.