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2 Surprising Expenses that Could Sink Your Retirement

Filed under: Retirement, Managing Medical Costs

Is retirement on the horizon? If so, now may be the time to create your retirement budget. A budget is one of the most important financial documents you can have in retirement. It helps you determine how much income you will need, and it can help you understand whether or not your plans for retirement are feasible.

Some of the items on your budget may be fairly obvious. For instance, you’ll likely have fixed expenses like housing, utilities, insurance and maybe even debt repayments. You also will have some discretionary expenses, which may include things like dining out, travel, shopping and more.

There may be some other expenses, though, that aren’t so obvious. Things like inflation, healthcare costs and even taxes, may sneak up on you in retirement. If you haven’t planned for them, they may be so significant that they threaten your financial stability and prevent you from living a comfortable lifestyle.

Below are two important expenses to keep in mind as you develop your budget and your retirement income strategy. If you haven’t yet developed your budget or if you are unsure how to plan for these or other expenses, talk to your financial professional.


1. Inflation

Inflation is an expense that often flies under the radar, but that doesn’t make it any less corrosive to your financial stability. It’s hard to notice because it happens gradually over long periods of time. Prices for items like groceries, clothing, homes, fuel and more often increase in small amounts, so it may not be obvious how those increases impact your wallet.

However, over time, inflation can have a big impact. Consider that even 3 percent inflation means prices could double in 24 years. If you have a retirement that lasts for decades, it’s very possible you could see prices for many items double after you retire.

Of course, if you are on a completely fixed income, you may find it difficult to keep up with rising prices. That’s why it’s important to keep some portion of your money invested in assets that offer some level of growth potential. Your financial professional can help you build an investment strategy that limits risk, but also helps you get the growth you need to combat inflation.


2. Healthcare Costs

According to a recent study by Fidelity, the average 65-year-old couple retiring in 2015 can expect to spend $245,000 out-of-pocket on healthcare during retirement. That figure includes a variety of expenses, including things like copays, deductibles, premiums, prescription drugs and more.

There are several steps you can take to manage your healthcare costs. One is to invest in your own health through exercise, healthy eating and regular checkups with your medical professional.
Another strategy is to contribute money to your healthcare savings account, also known as an HSA. With an HSA, you can deduct your contributions from your taxes, grow your balance on a tax-deferred basis and take out withdrawals tax-free as long as the money is used for a qualified healthcare expense.

The best part of an HSA is you can take it with you into retirement. That means you can save money today for future healthcare expenses in retirement, and you can do it on a tax-deferred basis.

You may want to look into long-term care insurance as many healthcare expense estimation surveys don’t include long-term care expenses. You can purchase long-term care insurance to pay for some or all of expenses should you need to stay in a nursing facility or if you require in-home nursing care.

Talk to your financial professional about how you can address both of these risks. Inflation and healthcare costs may not be obvious expenses in your budget, but they can have a big impact on your retirement income. Work with your financial professional to develop and implement an action plan to manage these costs.


This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

15510 – 2016/3/29