How To Estimate Retirement Expenses
Whether your retirement is years away, or right around the corner, it is important to know how to estimate retirement expenses. If you plan incorrectly, you might have to work a part-time job after you retire. If you accurately determine your retirement expenses, your golden years can be spent doing as you please.
- List your current living costs. Include your mortgage, food and all other household-related expenses. If your mortgage will be paid off during your retirement, remember to remove that cash outlay when you estimate retirement expenses. If you have children, they will likely be grown and living on their own when you retire, so deduct the costs related to your dependents.
- Your leisure time activities will increase. If you intend to travel more, make sure to allow for this when you estimate retirement expenses. Entertainment costs, such as dining out at fancy restaurants and attending live sporting events, can quickly put a dent in your wallet. Hobbies can also be quite expensive, so budget accordingly for all of your post-retirement activities.
- Figure out what your taxes will be. When you retire, the loss of regular employment income could cause your taxes to decrease. This depends on your total income from a retirement or pension plan, Social Security and other investments. You should consult a tax specialist for help with retirement expenses in this area.
- Your medical costs will probably rise as you get older. You will have to attempt to budget for this increase when you estimate retirement expenses. You might need to alter your insurance coverage, so you should check with your agent to see what the changes will cost. If you qualify for Medicare, research the premiums associated with the different plans they offer.