3 Unexpected Retirement Costs That Can Shake Up Your Finances
Most Americans spend their entire career working hard to save money for retirement. The goal of reaching retirement is to eventually take your foot off the gas and relax a little, but stress can creep in when you find that you do not have enough money to make it through retirement. Even for those who save money for retirement, there are unexpected costs that can arise. These costs can shake the foundation of your savings, but that does not have to be the case. Here are some unexpected retirement costs you should plan for to avoid suffering a setback.
Health Care Expenses
According to CNBC, healthcare expenses represent one of the biggest challenges to the retirement savings of Americans. An estimated 43% of American retirees were spending more on healthcare in retirement than they anticipated. Most Americans believe that social safety nets are in place to protect them during retirement, including options like Medicare and Medicaid. However, these government programs are not designed to provide coverage for some of the typical costs that are draining the finances of retirees. Among these factors, dental care, dentures, hearing aids, and routine foot care account for some of the greatest challenges to the retirement savings of most Americans.
Home & Car Maintenance
Another unexpected cost that can shake up your finances during retirement includes housing and transportation. Many older generations of Americans viewed homes as a great investment that would pay off in retirement. The goal for many was to have no rent or monthly mortgage payments come retirement age and maybe even use that equity to sell the home. However, even those who live in a home that is paid for can face financial struggles in retirement because of home maintenance.
While there is no mortgage to pay, the home will still require repair and maintenance. These costs come in small payments and large payments. Examples of small payments include hiring lawn care companies, leaf removal in the fall, and general landscaping upkeep. Larger payments include the cost of a new roof, HVAC replacement, new appliances, or even new windows. The same can be said for automobiles.
You might own your vehicle outright, but there are still costs associated with ownership that include gasoline, regular oil changes, major checkups, and costs associated with new tires or transmission repairs.
Finally, many Americans are not prepared for the impact that taxes have on their retirement finances. In fact, a good portion of Americans report spending more on taxes in retirement than they were expecting. One of the reasons behind this is the locale in which you live. Some states have individual income taxes that drain retirement income, while others have tax retirement income directly such as Social Security. However, if you have the ability to move to a tax-friendly locale you can avoid these costs and keep more of your own money during retirement.
Retirementliving.com notes that there are only seven states in the US that do not have individual income taxes, and this applies to both income while working and income from retirement benefits (including Social Security). These states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Across the country though, there are other states that have individual income taxes with no retirement income taxes or lesser taxes on retirement incomes. Do your research to find a state that has a tax system compatible with your financial needs during retirement. For more information contact Hughes Warren Inc.