Preparing for your future through retirement planning and contributions is an essential move for securing your financial future. The average age many Americans target for their retirement is 65 years old and by this point in your life there are certain expenses that should be accounted for to allow you to enjoy your later years. The primary expenses that are essential for retirement living include: housing, food and healthcare. These areas are typically obvious for anyone planning for their retirement but what is often overlooked is that there are hidden expenses that many can miss when planning for their future life after working. Often times even financial advisors may neglect certain expenses and fail to advise their clients accordingly. This is why it is always important to perform your own research and planning to calculate for all considerations in your later years.
Expenses to Consider for Your Retirement
Employee Benefit Research Institute (ERBI), a nonprofit data organization based in Washington DC, conducted a study to determine the biggest spending sectors during retirement. Their findings revealed that housing was the highest expenditure followed by transportation and then healthcare. Supporting data from the Bureau of Labor Statistic implies similar results: showing that housing, transportation and covering health cost are among the largest expenses for retirees. Housing accounts for 33.9% of the expenses while transport accounts for 16% just above 13.4% for health.
A Commonly Overlooked Retirement Expense
Typically housing arrangements and healthcare costs get more attention for retirement because they tend to be the most obvious. However transportation is regularly skipped or forgotten when it comes to financial planning conversations. Joseph Coughlin, the director of the Massachusetts Institute of Technology AgeLab, agrees, stating that transportation is one of the greatest overlooked and under-planned expenses during retirement. A different viewpoint that undermines transport expenses at retirement is planners assuming that at over 65 years, you won’t need move around. Despite not owning a car or not being able to drive, there are other costs such as hiring a car or using the public transportation system.
Transport goes beyond just buying a car. It comprises of insurance, gas, maintenance and repairs, rentals, leases and public transportation. These types of costs have to be factored in as transport expenses because they impact your retirement plan. The Bureau of Labor Statistics puts car expenses for adults above the age of 65 at $2,282 annually.
Gasoline and oil cost an average $1,757 per year, insurance $1,063 and repairs $798 annually. These expenses will definitely put a dent in your retirement plan.
A report by Transportation for America, an institution lobbying for investment in local transport suggests that 79% of seniors over the age of 65 stay in car-dependent suburban and rural communities. This just goes further to explain how vital transportation cost is while planning for retirement.
Other forgotten expenses are food, pensions and social security and entertainment among others. But they may not be as critical as transportation.
One of the best solutions is to consider bench marking your financial plan with renowned investments firms like JP Morgan, as such institutions have poured serious money into research to determine how much an individual should have saved at a particular age.
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