Have you prepared a projected budget for your retirement? If so, that’s a good first step toward planning your retirement income strategy. Your budget can help you determine how much income you may need and whether you’re on track to reach your goals. You can also use your budget to adjust your spending as needed.
Your budget probably includes things such as housing, groceries, travel, dining, clothes, utilities and much more. You may be able to estimate these costs based on your current spending and your plans for the future.
However, there may be some costs that are more difficult to estimate. Some expenses are unpredictable. There are others that you may never face. Below are four surprising costs that you may not have considered while creating your retirement income strategy. If you haven’t developed a plan for these costs, now may be the time to do so.
Certainly, most people don’t plan for divorce until the process actually starts. However, an increasing number of senior couples are deciding to divorce after they reach their golden years. According to a recent study, the divorce rate for couples over the age of 50 more than doubled from 1990 to 2015. The rate for couples over 65 tripled during that same period.1
As you might guess, a divorce can be costly and can have serious impact on your financial stability. You and your spouse may have to split retirement assets and income sources. You may not be able to afford the same standard of living on your own.
The best way to minimize this cost is to reduce the odds of divorce. Many retired couples find that boredom and a lack of purpose are contributing factors to marital issues. Find ways to stay active and engaged after you retire. Look for groups you can join, or even consider part-time work. That could help you and your spouse enjoy a happy and comfortable retirement together.
Think your days of supporting children are over? Think again. A study from Fidelity and Glamour magazine found that more than half of young adults rely on their parents for some level of financial support.2
It’s not only your kids who may need your help. Many young retirees find that they spend their retirement caring for elderly parents who may struggle with dementia or Alzheimer’s. You may even need to pay for your parents’ care.
Plan ahead by having conversations with your family about your financial outlook. Your kids may be less likely to ask for help if they know where you stand financially and what challenges you face. Also, talk to your family about the care plan for your parents should they need help. By developing a strategy early, you may avoid costs later.
While it’s important to think about your elderly parents’ care, you also may want to consider your own needs. According to the U.S. Department of Health and Human Services, nearly 70 percent of seniors will need long-term care in retirement.3 That care, whether provided in the home or in a facility, can cost thousands of dollars per month.
You can minimize the impact of this cost by taking action early. Set aside an emergency reserve fund to pay for costs. Think about purchasing long-term care insurance to cover a portion of the expenses. And invest in your own health to minimize your need for care in the future.
Finally, make sure your budget accounts for inflation, which is the gradual increase in prices on a year-to-year basis. Inflation is a natural part of the economy. Although the rate may vary from year to year, inflation itself is inevitable over the long term.
You may not be able to predict the specific inflation rate. However, you should have a strategy that provides for increasing retirement income. If your income level is completely fixed, you may find in the future that you are no longer able to afford your lifestyle. Your financial professional can help you develop a strategy for increasing income.
Ready to implement your retirement income strategy? Let’s talk about it. Contact us today at Intelliplan Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
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