Here at Aging Options, when we consult with our clients, the question of preserving assets in retirement looms large in their thinking. Helping our clients protect their assets – and the independence that goes with them – is one of the centerpieces of our retirement planning.
So we were particularly interested to find this very recent article on the financial website of US News & World Report. At first the article seems to be pointing out something most of us know: generally people spend less in retirement than they did when they were working. In fact, according to the Government Accounting Office (GAO), per person spending drops after retirement by more than twenty percent. So that’s good news, right?
Not entirely. While some expense categories will drop when you retire, others will rise. Planning for these changes is vital to creating a realistic financial blueprint for retirement. So, according to the US News article, which of the seven major categories of spending will go up in your senior years and which will decline? Here’s a quick recap based on figures from the GAO. (For more details, see the full article.)
Tops on the “good news” side of the ledger is housing costs. This, of course, depends on the individual, but the GAO says seniors spend almost 20 percent less on housing than adults between 50 and 64. We suspect this difference can be due to downsizing or paying off a mortgage. However, those who move into expensive retirement homes may see spending on housing go up, so planning is essential.
Two more areas where expenditures tend to drop are transportation and food costs. For the former, the biggest and most obvious change is commuting expenses: compared with the average 50-64 year old, someone 80 or older will pay about one-third as much per year on getting around. As for the cost of food, while the drop isn’t as large, retirees do tend to spend less, perhaps because they can spend more time cooking and don’t have to rely so much on time-saving but high-priced prepared foods and take-out.
Two additional areas where retirees spend only a little less, says the GAO, are on expensive consumer goods and entertainment costs. Not having to spend so much on work-related goods (business attire, for instance) may account in part for the former category, not to mention the fact that seniors may be less prone to “needing” expensive technological gadgets than their younger counterparts. The slight drop in entertainment costs may reflect the choices seniors make, opting for lower-cost diversions (many of which come with senior discounts).
The final bit of good news for your budget: as a retiree you’re no longer saving for your own retirement. For seniors, compared with younger peers, expenses for personal insurance and pensions drop by more than 60%.
So where’s the bad news? Health care is the one area where costs are almost sure to go up for seniors. Again, individual circumstances will vary widely, but on average someone in the 65-79 age group will spend at least 28% more per person than someone 15 years younger. If you’re on expensive prescription drugs with hefty out-of-pocket costs, the cash outlay gets considerably greater.
But here’s the best news of all: you can enter your retirement years with confidence, armed with a plan that takes all these and other areas of aging into account. With a LifePlan in place, you’ll know that your finances are in order, your legal affairs taken care of, your housing needs planned, your health care arranged and your family on board. Why not take the first step toward preparing your own LifePlan by attending a free LifePlanning Seminar, coming soon to your area? A LifePlanning Seminar is the perfect place to start your journey toward a secure and fruitful retirement.
For seminar dates, times and no-cost registration, click on the Upcoming Events tab on this website. It will be our pleasure to work with you!
(Originally reported at http://money.usnews.com)