How to determine retirement costs to live peacefully

At the age of 60 or 65, all of us reach the retirement phase. It could be a relief for some of us, or the opposite-stress.  Stress because you did not calculate expenses correctly. The best way to retire peacefully is to consider needs carefully, additional or fewer expenses before the day comes.

The most common mistake many retirees make is underestimating the cost of a comfortable lifestyle after retirement. They will eventually overspend because they did not plan or did not know how to do it.

It is a much easier task when you know how much you know about maintaining a standard of living.

If you plan to stay in your current home, you should know the average utility bills and property taxes. However, since you spend more time at home, there may be a slight increase.

Simultaneously, since you don’t go to work every day, you will spend less money on commuting and maintaining work wardrobes.

To estimate how much money you need after the retirement, you should determine your retirement expenses.

Let’s discuss several major extra expenses that might occur after retirement and need to consider in advance.

Additional costs that might occur:

• Housing

Regardless of age, housing is the largest category of expenditure. According to data from EBRI, people between 65-74 can expect this expense to consume about 45% of their budget.

However, you can reduce these costs in advance if you consider several steps:

The best option is to pay off your mortgage before retirement. Make a financial plan about unavoidable expenses in advance, such as utility bills, property taxes, food, necessary renovation costs. Besides, you can rent out a room, which reduces the size of the house and expenses. In addition, you can move to a less expensive place.

• Healthcare

Another considerable expense you will need to take into account in advance is medical care. The fees can exceedingly grow the older you get.

Even if you are self-employed, you may get health insurance through an employer plan. It will not happen when leaving the job. Moreover, Medicare does not start functioning until you are 65 years old. Also, when it comes to Medicare, it is not always accessible.

Some married couples might need approximately $363,000 in medical expenses from 65 to the end of their lives. The estimated cost of long-term care ranges from $1,603 to $8,821 per month. The price depends on weather you can stay in a community or in a private nursing room.

• Transportation

Just because you don’t commute to and from work every day, it doesn’t mean you won’t pay for transportation. In fact, the average annual cost of owning a new car climbs to $9,282, or $773.50 per month. If you completely own your vehicle, you still need to consider insurance, maintenance, registration, and filling up the tank.

You can also choose some other methods to reduce transportation costs. If you live in rural areas that rely on cars, almost 80% of them belong to the elderly over 65. If you own two vehicles, merge them into one. Also, shop around and get more affordable car insurance.

How can you calculate expenses properly before you retire?

You can always calculate the approximate amount of expenses you might have after retirement. An excellent way to start estimating retirement expenses is to use your current monthly income as a starting point. Then you can add or subtract any expenditures you expect for retirement expenses.

For now, your company pays your health insurance premiums but once you retire, you will have to pay for it.

If you plan to travel in retirement, you need to consider the extra budget for it per month.

You’ll pay off the mortgage in advance, so you’ll only need to pay taxes and insurance on your home. That cuts out a large amount per month from your spending.

After adding up those costs, you can determine your total expenses in your retirement. Multiply that amount by whatever number of years you expect to be in retirement. At the end, you will have a good starting target for your retirement accounts.

We suggest you to take your time and be thorough with this step. Right down the numbers, consider extra expenses, do the calculation and you will live in a peaceful retirement.