Hidden Retirement Spending – More than just a Monthly Income

Do you know exactly how much money you will need on average per year during retirement? Most think about a monthly income to support a desired lifestyle, but there is so much more to consider when you retire. 

A financial advisor can help you make a comprehensive retirement requirement budget for your money and create a plan of action to have not only the retirement lifestyle you desire but also to cover all the other costs that many do not think about.

Expenses you might not have thought of when you retire

Normally, we plan for an average monthly income from a pension, annuity, or investment, but consider these additional expenses that will also eat into your retirement savings pot. 

  • Once-off expenses – These could include a major renovation like a roof replacement, a new kitchen, an addition, buying that vacation home, or even converting part of your larger house into a rental unit. These lump sum expenses need to come from somewhere. If it comes out of your retirement money, then you have less for your monthly income.
  • Dream vacation costs – We all dream of that once-in-a-lifetime vacation like a luxury cruise, an around-the-world trip or even a 6-month vacation on a tropical beach. The one time that you can make it happen is probably at retirement, when you will more than likely have the most money in your account that you’ve ever had. 
  • Emergency spending – Life doesn’t stop happening because you are retired. There will always be unforeseen expenses that occur, like a major car repair, an unexpected overseas trip for a funeral or even flooding. Will your average monthly income be sufficient to cover this, or do you need a savings account for this?
  • Honeymoon phase spending – These are the years directly following retirement when you are in a vacation mood, don’t have a working budget plan yet, and tend to spend more than any other period of your retirement. You have lots of spare time and travel more often, eat out more, and want a few luxuries like new hobby supplies or sporting equipment.
  • Increased healthcare costs – Let’s face it, growing old is not fun, especially if you have existing health conditions or ailments. As you age, you will spend more money. Your healthcare costs will increase, like more medication, assistance equipment like walking aids, specialised needs like live-in care, or moving into an assisted living village. Don’t forget about health insurance if you retire in a foreign country. You might not be eligible for public health care or might want the convenience of private care.
  • Supporting family members – This is very much a reality in today’s modern society. More than one generation living in a household, whether it be elderly parents who don’t earn enough pension, adult children, or even grandchildren. This adds to monthly expenses, and you might even have to loan money to children to help with a home deposit, for example.
  • Inheritance tax costs – Some countries levy high inheritance taxes for beneficiaries. Will your children have enough money to pay these taxes before they can inherit? You might need a life insurance policy or lump sum investment to cover this when you pass on.

Retirement spending is an important part of any retirement budget. Your financial advisor can help include all spending aspects of the retirement life cycle, not just monthly income, and get an expense budget in place.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

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