6 Retirement Costs to Keep in Mind

Taxes

Taxes will still be a significant expense in retirement. Consider income taxes, property taxes and any taxes related to your investments. You may even consider a plan for tax diversification in your retirement portfolio to balance taxed and tax-free income in retirement.

Health care

Health care is one of the biggest expenses to expect in retirement. Medicare premiums and out-of-pocket payments are important budget line items. As you plan and prepare for retirement, you also want to be aware of whether or not you belong to an employer-provided health care plan that carries over to retirement. If you do, it may be worth the time to do your research to find out what your options are and if they are right for your retirement situation.

Prescriptions

Since 2015, at least 1 million enrollees per year in Medicare Part D have had drug costs high enough to exceed the catastrophic coverage threshold, which is $7,050 in 2022. If you have a condition that requires specialty tier drugs — such as cancer, multiple sclerosis or hepatitis C, your out-of-pocket costs can be exceptionally high. Once you hit the catastrophic threshold, you’ll pay either a small coinsurance or copay for drugs, but there’s no cap on out-of-pocket spending under Medicare Part D; it can add up if your drug is expensive.

Long-term care

While you are on the health care topic, take the time to research your long-term care insurance options. As we grow older, long-term care might become necessary. Purchasing long-term care insurance can help with the costs, but it’s wise to prepare for out-of-pocket care costs as well.

Emergencies

Does your budget have room for surprise expenses? Because it is no surprise that they are bound to happen! An emergency fund can help you manage costs associated with unexpected events, like a major home or car repair, without seriously impacting your investments or your long-term financial goals. If you plan and budget for these expenses, then hopefully they won’t take you by surprise (or at least not as much of one).

The fun stuff

This is the good stuff! Your retirement years are all about enjoying what makes you the happiest: travel, hobbies, family and friends. Setting aside money for vacations, your favorite activities and spoiling your loved ones can be the fun part of budgeting.

Although this list is just “6 Things to Keep in Mind,” we know this is a lot to consider. And there is no shame if you are feeling overwhelmed with the planning, budgeting and researching that goes into a retirement plan. We talk to people just like you who just need help thinking through their plans and developing strategies to reach their goals.

Have Questions?

We recommend reaching out to a certified financial planner for help, even if you just need to ask some questions. Financial advisors can help guide you, ask good questions to help you create a plan, and provide you with invaluable advice to help place your money where it has a good chance of working at its highest and best purpose.

If you’re selecting a financial planner for the first time or are hoping to move your services to a new firm, you may be wondering what to ask during an initial interview so you’ll be able to relax and know that you are in good hands. Read our blog for five key qualities you’ll want to seek out in your financial planner.

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