Typically, you should plan to travel much more in early retirement and much less — to not at all — in the later years of retirement, says Toberman. That’s why, he suggests, folks who have set aside money for travel throughout their retirement but then cut back on trips due to health reasons might find a small “safety net” they can dip into for medical costs.
4. Transportation
This is one of the most important areas of retirement spending but one of the least considered. As they age, retired folks often increasingly rely upon others to help them get from place to place, says Ralph Bender, a certified financial planner in Temecula, California. This might be an Uber ride to a doctor’s appointment or a cab ride to the grocery store and back. “Transportation is always going to be an expense,” he says.
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Even folks who purchase a new car before retirement will be faced with multiple transportation costs, ranging from payments on the car to maintenance to gasoline and insurance, says Bender. And if you choose to retire to a remote area, he says, your transportation costs will likely be that much higher — and you need to factor this in.
5. Utilities
Your utility costs are one of the few expenses that should head south in retirement. For one thing, you typically no longer have to pay for children taking long showers or cooking at all hours of the day and night, says Toberman. Also, folks tend to downsize their homes, which would require less heat and air conditioning, he says. Even then, the rates that utilities charge all customers will continue to increase annually. That’s why Bender notes that installing solar panels with batteries can reduce rising electricity bills.
6. Fitness and wellness
It there’s one area where financial planners agree retirees will get the most bang for their investment, this is it. People who invest in health and wellness typically have lower medical costs, says Ross. This can be anything from gym memberships to yoga classes to Peleton bikes to quality sneakers.
The more retirees spend on fitness and wellness, the less they spend on medical costs, says Toberman. He recommends that retirees allocate up to 10 percent of their total monthly spending for health and wellness, which he says can include anything from personal trainers to nutritional supplements to home exercise equipment. “It’s not hard to spend $500 per month on this, and there are a lot worse ways to spend money,” he says.
7. Kids and grandkids
Spending on kids and grandkids can be as simple as a Starbucks gift certificate, as lavish as a trip to Disney World, or as lofty as a fat contribution to your grandkid’s 529 college savings plan. In almost every case, it’s going to be more than you think, says Ross.
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