Five Expenses That Will Exhaust Your Retirement Savings
After years of hard work and financial sacrifice, most seniors approach retirement with excitement, making plans for an exciting future. There is much to look forward to as the coming years beckon to you.
However, there is a significant chance that your retirement savings will not give you the life you have been dreaming about for so many years. Getting older is expensive, and several costs could deplete your hard-earned financial reserves. Here are five examples:
Skyrocketing medical expenses
Upon reaching retirement age, seniors qualify for Medicare. Many feel relieved knowing that their medical expenses will be covered without having to pay for health insurance. They are in for a surprise, as Medicare simply does not work that way. Membership of Medicare presents coverage limitations that could lead to crippling financial bills that will make a massive dent in your savings.
Russell Noga of MediSupps recommends that seniors take a serious look at the Medicare Advantage Plans 2021 has to offer. He is an expert in this field and believes that a small investment in a premium will offer you significant coverage that standard Medicare does not. It supplements Medicare Parts A and B, and different plans facilitate coverage of other parts of the program.
A roof over your head
Not all retirees have finished paying off their mortgages, so these repayments must factor into your monthly budget. Even if you have, homeownership comes with several expenses. Property taxes remain payable and rise every year.
Maintenance is another challenge. If you have lived in your house that long, it is an older property that requires more maintenance than newer homes. Now that you are that bit older, it is unlikely that you can perform complex maintenance tasks yourself. Therefore, you must hire someone, leading to additional expenses.
Most people do not factor entertainment into their retirement budget, but it becomes an important part of their lives. Most seniors want to incorporate travel into their retirement plans.
While it is time to spread your wings and explore the world, do not do so at the expense of your retirement savings. Save a portion of your budget toward travel and look for discounted rates for seniors from tour operators.
There are ways to spend wisely on entertainment after retirement. For example, take advantage of discounts offered by cinemas, museums, and tourist attractions.
It is not a prospect many people entering their senior years wish to contemplate, but long-term care becomes a reality for more than 50% of elderly people. The costs of this care are staggering and will quickly deplete your retirement savings. It costs upward of an average of $100,000 per person to live in a shared room in a long-term care facility.
Upon retirement, you have different options. First, you should secure a comprehensive insurance plan that will finance long-term care costs, should they become necessary. Second, invest in a home in a retirement community as it is easier to get into their long-term care facilities if you are an existing resident.
Retirees are not exempt from taxes, and what you owe the IRS at the end of each tax year might be a financial burden you have not budgeted for. Withdrawals from a 401(k) or IRA are taxable, as are traditional investment income streams, interest on savings, and Social Security benefits.
However, there are tax benefits for seniors to take advantage of, such as the increased income threshold before taxable income is calculated. Consult a tax expert for advice on how to keep your tax bill as low as possible.