Individuals may be surprised to learn about where they’ll be spending the bulk of their money when they get older. Here’s a look at three key categories.
Housing: According to data from the Employee Benefit Research Institute, in 2017, the most recent year for which data is available, housing accounted for roughly 49 percent of all spending for seniors. Focus should be centered on lowering those costs when a fixed income is imminent. The possibilities include paying off a mortgage; downsizing a home to have a lower rent or mortgage payment; refinancing a home to a fixed-rate loan so that costs are predictable; and taking on a tenant to offset costs.
Food: The cost of food will not change dramatically, but it can eat into your budget. Even though food costs may decline when there’s only two mouths to feed, food and beverage spending may go up due to more leisure time and dining out. Utilize senior discounts by shopping on days when stores offer percentages off purchases. Save money on restaurant spending by eating out at lunch instead of dinner, splitting plates or skipping appetizers.
Healthcare: Experts warn that while many expenses decline in retirement, health care spending increases. According to Fidelity, the average 65-year-old couple retiring in 2020 in the United States needed roughly $295,000 just to cover their retirement health care expenses. Those with family histories of severe illnesses or those with preexisting conditions will need even more. It’s also important to realize that roughly half of the population will need long-term care at some point, offers The Motley Fool, and that requires advanced budgeting as well. Many people find that Medicare supplement plans can bridge the gap in expenses that government-run plans will not cover. Saving through a health savings account (HSA) when employed also can create extra cash on hand for retirement expenses.
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