Retirement Expenses and Planning Considerations

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Learn about the different types of expenses you should consider preparing for in retirement from Huntington Bank.

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When you begin thinking about retirement, there’s plenty of helpful advice to get you moving in the right direction. For example, “start saving early and increase your savings over time" or "take advantage of any employer match contributions."

While these are great starting points, eventually retirement stops being a distant thought and becomes a concrete concern, especially as it relates to expenses. The difference between how you want to live and what you need to save becomes clearer as you grow accustom to your everyday lifestyle.

Some expenses may have a greater impact on your lifestyle than you’d expect, while others might catch you by surprise. At Huntington, we can help you plan for how your expenses might change in retirement and what those expenses might be, so you can decide if you're on track with your savings plan or if you need to adjust.

To get started, ask yourself these questions:

  • Where do you want to live? The cost of living and tax policies of the state you plan to retire in will have a significant impact on how far your retirement savings will go.
  • What will your housing costs look like? Where you live and whether you own, or rent will impact your housing expense budget.
  • What lifestyle do you want to maintain? Many individuals can see their overall expenses drop in retirement, but everyone is different. Perhaps you want to travel more or establish a legacy fund for future generations. These are considerations to keep in mind as you strategize your savings plans.
  • What do you expect your healthcare costs to look like? This can be a difficult expense to predict or calculate, but this may be a good opportunity to explore your family medical history to see if there is anything you should consider for the future.
  • How many years of income will you need after retirement? The average American is living 20 years in retirement, so you’ll want to factor this in so that your money won't run out.

By making these considerations, you can establish a game plan for how much you may need for retirement.

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Common Everyday Expenses

Everyone’s lifestyle may look a little different, but there are common everyday expenses that most people can expect. These types of expenses are a little easier to plan for and stay more stable throughout retirement, although you may still experience some increases over time due to inflation and other factors.

Here are a few common expenses to plan for:

  • Housing: Unless you've paid off a mortgage, housing will most likely remain one of your biggest expenses in retirement. Do you anticipate downsizing? Could you see yourself moving to a warmer climate? If you have paid off your mortgage, you'll only have to worry about homeownership's associated costs, like taxes, insurance, and on-going maintenance. Knowing your housing plan and what percentage of your monthly income you want to dedicate to it should be a big part of your retirement expense planning.
  • Food: Another common expense is food. Maybe you'll use your free time to cook and eat more meals at home, but you could also choose to use your newfound free time to eat out more often and have frequent lunches and dinners with friends. Anticipating small shifts in your food consumption can help you estimate this common expense.
  • Transportation: You’ll still need to get where you want to go while in retirement, but you'll have some more opportunities for savings. Whether you’re spending less money on gas without a commute or getting rid of a vehicle and utilizing public transportation, you'll want to consider a budget for transportation.
  • Healthcare: For most people, healthcare will be one of the largest retirement expense buckets. You might assume Medicare will cover the bulk of your healthcare expenses. However, between your Medicare premiums and out-of-pocket costs, you should plan for healthcare costs to be a significant portion of your retirement budget. Unfortunately, you should also expect your healthcare costs to continue to rise as you age, and planning for those costs is even more important.

Additional Expenses to Consider

After your common everyday expenses, you'll also want to be mindful of a few additional costs that can be more variable. First, keep in mind depleting taxes and inflation. If your retirement date is a decade or two away, there is a good chance your dollar will not stretch as far in the future as it does today. Knowing that inflation may put a dent in your retirement savings is part of the reason it's crucial to start saving early.

Second, know how your taxes can impact your retirement income. Whether it's a traditional Individual Retirement Arrangement (IRA) account or Social Security distributions, knowing your tax liability is necessary to understand how much of your savings you'll be able to use. Consulting a tax advisor is a great way to help you limit your tax liability and understand how taxes can impact your retirement savings plan.

You'll also want to plan for major one-time events you may encounter. Whether that's college planning, helping a child pay for a wedding, or long-term care for aging parents, anticipating major one-time payments will be an important part of your planning process.

Last, consider your lifestyle decisions. The vacations and travel you plan, the hobbies you want to learn or continue, and the charitable donations you plan to make. These are joys of retirement and the life-affirming activities that can bring unquantifiable meaning to your free time. For these reasons, you'll want to plan for how those expenses will affect your savings.

Retirement Expense Calculators

When it comes to calculating your retirement costs, use our retirement calculators to help you answer questions ranging from "What will my expenses be after I retire?" to "Which savings should I use first?" While these calculators are a great self-help tool, it can also be helpful to talk through your financial situation with an advisor to align on a plan that works for your needs.

If you're ready for a conversation about your next retirement steps, give your local Huntington Financial Advisor a call today at (877) 587-8049, or call your local Advisor with Huntington Private Bank® at (800) 543-7517.

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U.S. Department of Labor. "Top 10 Ways to Prepare for Retirement." U.S. Department of Labor. September 2019.

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