Top Living Expenses Seniors Underestimate After Retirement

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10,000 baby boomers reach the age of retirement every single day in the U.S. A recent study done by LIMRA Secure Retirement Institute found that over 25% of retired seniors underestimated what their basic living expenses were going to cost. Over 30% of newly retired Americans feel they won’t be able to live the retired baby boomer lifestyle they once dreamed of and spent their entire working career saving for.

Other expenses that retirees found to be higher than they expected was long term care and healthcare costs. We automatically assume our expenses will decline once we stop working. Yes, you’ll be able to reduce some expenses, but you’ll also find others will increase. Below, we’ll discuss costs for basic living expenses, long term care and healthcare costs post retirement.

Basic Living Expenses

Basic living expenses include housing, taxes and entertainment. Even though many seniors are mortgage free by the time they retire, they still end up having more maintenance expenses then expected. The annual maintenance on a home can be up to 4% of its value. Property tax is another expense that most retirees are unprepared for. Unfortunately, many homeowners don’t realize their property taxes can increase over time, leaving them in a financial crunch come tax season.

Once you retire from your 9-5 job, you’ll have tons of extra free time. So, we’re unsure why seniors tend to think their entertainment costs will decrease after they retire. Finding ways to fill in your new spare time can quickly add up. Whether you enjoy traveling or a weekly afternoon outing to see a matinee movie, you should factor these costs into your budget. Many seniors are taking advantage of the new ride sharing platforms, like Uber and Lyft, to help get them around town!

Long Term Care Expenses

Nobody likes to imagine themselves living in an assisted living facility or nursing home. However, over 70% of seniors find themselves needing this type of long term care. If you don’t financially prepare yourself for these types of expenses, you won’t be able to afford the care you need. Depending on where you live, the average cost of assisted living facilities can be over $40,000 per year, the cost of home health care can be around $50,000, and a nursing home can cost over $80,000 per year.

Healthcare Expenses

A healthy 65-year-old on average spends $200,000+ on their medical costs after retirement. As you age, naturally your healthcare cost will increase. Of course, this depends on how healthy, or unhealthy, you are. Many retirees receiving Social Security automatically assume they’ll be fully covered once their Medicare benefits kicks in. Unfortunately, that’s not the case. Medicare only pays for 80% of your healthcare expenses, leaving you responsible for many out of pocket costs such as deductibles, copays and coinsurance.

Many Medicare beneficiaries choose to add secondary Medicare supplement coverage, commonly referred to as Medigap plans, in addition to their Original Medicare to give them peace of mind. These supplement policies are offered through private insurance companies and cover those out of pocket expenses that can quickly add up.

A sure way to ruin your retirement dream lifestyle is to underestimate your living costs. Having a well thought out retirement plan, prior to retiring, will protect you and your family’s finances and allow you the financial freedom you always imagined.

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