People usually spend around 20% less after retirement. There
are a lot of factors that contribute to these such as spending less on clothes,
child care, your children’s education and your kid’s education.
According to a study by the Employee Benefit Research
Institute that household expenses steadily decline with age, which is an
average of 19% between ages 65 and 75 and a total of 34% by age 85. Even if your
household expenses decline after retirement, there are new expenses that will
come your way and they are the following:
Housing – You can downsize to a much smaller home or move to
a part of the country where the cost of living is cheap. You can also look into
reverse mortgage in order to increase your retirement income.
Health care – People are living much longer nowadays, one of
the reasons that they will medical attention or long-term care. Its cost is skyrocketing
today and the best way to cover this is long term care insurance coverage.
Taxes – You’re no longer responsible for payroll taxes but
you’re still required to pay income tax on the income you receive from
withdrawals from IRA and investments and portion of your Social Security
benefits.
Transportation – The best way to save is by downsizing from
two cars to just one. If you’re a part of a good neigborhood that has reliable public
transportation, then it’s possible to go carless.
Travel – Most people who retire prefer to travel. According
to a survey by Allstate, people are willing to spend $7,700 annually for
travel. This is just a discretionary expense which you have total control of.
