Will You Really be Financially Ready for Retirement?

 Posted on October 29, 2015 in Estate Planning

Many people formulate plans for their senior years—they set up retirement and other investment accounts, and they draw up wills and other legal documents to help ensure that their senior years are indeed the golden years.

However, as people make these plans decades before the plans will actually be enacted, it is worthwhile to question whether or not they realize just how much they will need when those golden years arrive.

According to statistics from the Employee Benefit Research Institute, most people will see an approximately 20 percent decrease in household expenses between the ages of 65 and 75 years old, and an even larger decrease (35 percent) by the time a person hits 85 years of age. Still, there are major household expenses that remain no matter what the age a person is and those are the ones people have to plan for when they will no longer be earning a weekly pay.

Housing

The first major expense—and also usually the greatest—is housing. Housing expenses such as utilities, furnishings, maintenance, and insurance typically eat up about 45 percent of one's income. Yet this is also an expense that a person can somewhat control. Many retirees choose to downsize, often to a home where they are no longer responsible for upkeep and maintenance. Another option seniors may choose is to take a reverse mortgage on their property.

Health Care

Health care is an additional expense which tends to increase with age. Once a person reaches his or her fifties, health care expenses usually increase by at least 10 percent. People in their eighties see those expenses spike by more than 20 percent. An option for some people may be long-term care insurance, which may protect a person from having all their savings wiped out completely because of out-of-pocket medical expenses.

Income Tax

Although retirees no longer earn a salary for which they have to pay income tax, there may still be taxes which need to be paid on any early withdrawals from retirement accounts or profit from investments.

Other Expenses

Other expenses seniors need to plan for include transportation and travel. Even though a person may not be driving back and forth to work each day, there is still a need for a vehicle in which to get around. A vehicle requires gas for travel, as well as insurance, maintenance and repairs. And although travel is not a "necessary" expense like household or health care, many people look forward to the day when they are have the freedom to visit new and/or favorite places.

As you make plans for your golden years, make sure to contact an experienced DuPage County estate planning attorney to help assist you with decisions and plans for your financial future.

Source:

http://money.usnews.com/money/blogs/on-retirement/2015/08/31/take-control-of-your-6-biggest-retirement-expenses