Budgeting for retirement keep it simple…
By this point, you know that setting a budget is vital to the success of your retired years. We’ve focused heavily on saving and creating budgets to ensure that your nest egg last throughout your retired years.
One key success factor that we’ve left out is spending. To achieve financial independence, you need to know on what and how you’re spending compared to the average American.
Your spending habits now are going to changes drastically throughout the years, particularly once your children leave and you’ve retired. When you retire, there is a good chance that your spending will go down drastically. We are going to detail in this article the average costs of household expenses in America.
Keep in mind that, according to United States demographics, the median age of Americans is 38.6 years old, and most Americans retire around the age of retirees was 62 years of age, according to a US News statistic published last year.
Average Retirement Expenses
During your retired years, you may find yourself spending significantly less. This is because homes are often paid off by retirement and, if this isn’t the case you may have downsized. Frequently, retirees may need less space, because their children are most likely grown and living on their own.
Although you should be wary of home repairs and make sure you take care of any leaks or things that need replacing while they are still small and – preferably – before you retire. Many people, tend to prepare for retirement so they can avoid any surprise expenses.
Health Care Expenses
This is probably where your spending will change the most, and it may not decrease. While Medicare is helpful for taking away some of the expenses associated with aging. It’s only natural that your health is going to decline. As you age, and with declining health, your insurance and the costs associated with it will most likely increase.
The average American spends roughly $4,316 on health care each year. For retirees, we recommend increasing your health care budget.
Groceries and Food
This budget will most likely hover right around the same as it’s always been for your household. Unless you and your significant other go out almost every night to eat in your pre-retired years. It is a common misconception that this budget will increase as you have more free time to eat out; however, this is typically not the case. The average American spends roughly $151 on groceries each WEEK and about $232 on monthly eating out.
We recommend keeping this budget much the same, as eating at home is an easy way to stretch your retirement budget and eat healthier.
Much like the myth that retirees eat out more than they do pre-retirement (which is roughly $200/month for the Average American), most individuals believe that retirees spend more money during their retired years.
In fact, aside from pre-planned trips or vacations, the average retirees might spend roughly the same amount of money on entertainment. This is because, once retired, you need to be more budget-conscious than you would without your steady working income stream.
Vehicle Maintenance and Transportation
Depending on where you live or to where you relocate during your retirement years, this budget could decrease drastically. Think about it: without the stress of a daily commute to and from the office, your gas budget and car maintenance will be lower than it would be in your working years.
Monthly, the average American spends about $0.18 on every dollar on transportation.
Things To Keep In Mind
While your budget might fluctuate while you are getting the hang of your non-working years, it is important to make sure you are consistently monitoring your spending habits and staying on track with them,
Additionally, you will want to see the help of a financial professional for expenses such as withdrawals and any emergencies that might arise. You will also want to make sure to plan for any large expenses during your working years. These include any vacations you might want to take once you’re retired as well as stashing away a sufficient fund for medical or personal emergencies.
Chances are your budget won’t look exactly like the numbers listed above; however, we’ve compiled this information so that you have a good idea of how to construct your retirement budget compared to the average working American’s budget.
As always, if you find yourself looking at these numbers and panicking about setting a budget, seek the help of a financial professional. A financial adviser can help assess your current financial status and help you set a budget to not only meet your financial needs, but to help you save money and prepare for the future.