You may have heard people tell you that it’s never too early to start saving and planning for your retirement. With the economy being the way it is, saving and investing for your retirement while you’re young is a good idea, especially if your company doesn’t offer pension plans. Being aware of what to budget for is also important.
Here are five retirement expenses you should budget for while planning for your retirement.
Home and Auto Maintenance
If you’re a homeowner, it would be a smart idea to have money set aside for any home repairs or payments you may still be responsible for. Home repairs can be quite expensive depending on the severity, so a good amount of money should be set aside for your home.
Likely expenses can range from roof repairs to lawn maintenance. Auto repairs and maintenance should also be taken into consideration. You may also decide later down the road that you may need a new car or want to move into a new home so set aside what you can for these unexpected cases.
Traveling and Leisure
When you retire, you’re going to want to enjoy your free time enjoying leisure activities and maybe even do some traveling. Both can be expensive depending on your hobbies, as well as where and how often you decide to travel. You should have funding for both set aside so that you aren’t sitting around the house bored and wondering what to do with your day.
Although the recession has kept travel costs down, there are still a lot of little costs that come with traveling such as food, gas, and activities on the trip. A good chunk of your funds should go toward this expense; after all, what is the point of retirement if you can’t do the things you love?
Children and Grandchildren
If you have children or grandchildren, you may want to have money set aside for holidays, birthday gifts, weddings, graduations and other ceremonies or for emergencies. If you want to help your children out of debt or your grandchildren with their college tuition, then start setting aside money to do so that when you retire, you are prepared.
If you also plan to have your children or grandchildren travel with you here and there, then this is one retirement expense you cannot forget to budget for.
It’s hard to determine how much you should have saved up for medical costs because of the chaos happening in Washington about health care. It’s also hard to imagine how much you will need if you are still young and healthy. If you’re very strict on taking care of yourself, you may not need to budget a whole lot for medical costs but on the other hand, anything can happen, so why not be prepared? You may also decide to help your spouse or family member with their medical costs.
That is why it’s important to always prepare yourself for the worse. Regardless if you and your family are in perfect health, you should still consider saving a good amount for medical costs. Look at your own habits and inquire into your genetic history to learn what kind of health risks you may face at an older age.
Yes, even when you’re retired you will still be obligated to pay taxes. Once you have figured out how much you will have saved for retirement expenses, you can assess how much you will need for your income tax on your retirement income. If you have a 401(k) plan, your taxes will depend on the current rate when you withdraw funds. Experts suggest to pre-pay your income tax on a portion of your retirement savings using a Roth IRA or Roth 401(k).
If you are considering annuities, you should first determine how to calculate annuities. If your retirement income is not coming from a plan, taxes can potentially be lower. You can also run a tax projection to help you better assess what you will owe.
If you want more guidance on how you can plan for your retirement expenses, schedule a visit with a financial expert. It is not easy to determine exactly how much you should save as it would depend on your lifestyle and situation however it is always smart to be prepared and have a plan.
Jane Miller is a freelance writer who loves to write about anything from tech to mommy stuff. She is featured in many blogs as a guest writer, and can write with authority on any niche or subject.