March 20, 2023

Top Retirement Expenses + How To Plan For Them

Are you a soon-to-be retiree looking to make the most of your hard-earned savings? If so, you're likely feeling anxious and unsure on where to start. Retirement can be a daunting process, with making sure that all expenses are accounted for and invested wisely expected in an uncertain financial climate. At Fiat Wealth Management we understand these worries and want to help! In today's post, we'll walk through the top retirement expenses so that you can begin learning how best to plan them into your budget.

Retirement Health Care Costs

Retirement is often considered a time to unwind, relax, and enjoy newfound freedom. However, one aspect of this golden stage of life that can be daunting is the potential for health care costs to quickly add up. As we age, our likelihood of needing medical care increases, and we may encounter unanticipated expenses that can strain our budgets. It's important to plan for these costs to ensure that we can navigate retirement without feeling anxious about healthcare bills. One helpful approach is to invest in long-term care insurance or consider a Health Savings Account (HSA), which can be used tax-free for eligible medical expenses. Prioritizing healthy habits and regular checkups can minimize the need for costly treatments later. Finally, keeping an open line of communication with your healthcare providers and researching Medicare options can lead to valuable insights on effectively managing retirement health care costs while maintaining a financially stable and enjoyable retirement.

Traveling in Retirement

Traveling in retirement offers endless possibilities for exploration and enjoyment, making it a favorite activity to many in their golden years. Retirees may choose from various types of adventures – from leisurely all-inclusive cruises, to cultural immersions in foreign countries, to joining groups on guided tours, or even embarking on solo expeditions across continents. As excited as retirees might be about hitting the road, it's important to plan and budget accordingly to ensure a stress-free experience. First, consider identifying priorities and narrowing down the travel wishlist to create a realistic and achievable experience. Additionally, researching various cost-saving options such as off-season travel, discovering discounts targeted for the senior demographic, or considering long-term rentals instead of hotels for extended stays will greatly aid in traveling within a fixed retirement budget. By carefully setting aside resources, retirees can happily indulge in the wanderlust that arises in their newfound freedom.

Taxes in Retirement

Navigating the tax implications of retirement income can seem like a daunting task, yet it's essential to be informed and prepared for this stage of life. When it comes to Social Security benefits, understanding that they may be partially taxable depending on your overall income level is vital. However, there are other sources of retirement income, such as traditional IRAs, Roth IRAs, and 401(k) accounts, each with different tax treatments. For instance, withdrawals from traditional IRAs and 401(k) accounts are generally subject to income tax, but Roth IRAs can be withdrawn tax-free as long as certain conditions are met. It's crucial to consult with a professional tax advisor to make sense of these varying tax implications and create a comprehensive plan in order to ensure a financially secure and tax-efficient retirement.

Financial Support for Adult Children

As parents, supporting our adult children financially can be both heartwarming and challenging. The desire to help, combined with the knowledge that they must navigate their path, can create a balancing act between providing assistance and ensuring independence. Luckily, there are various options for extending a helping hand. One option is co-signing a loan, which allows parents to use their established credit as a support system. Another alternative is assisting adult children in creating a budget or financial plan, empowering them with the knowledge to move toward a secure financial future. Furthermore, by investing in their education, such as helping pay for higher studies or vocational training, you can significantly impact their career trajectory and long-term success. Lastly, you might also provide practical assistance, like offering temporary housing or gifting a small sum of money for an essential purchase. Ultimately, it is vital to choose the support method that aligns with your adult child's unique situation, fostering their growth and helping them achieve a stable financial standing.

Housing Expenses

Retirement presents an opportunity for many to fully relax and enjoy their golden years, although it is crucial not to overlook the varying housing expenses that may arise. One major expense to consider is property taxes, which can be substantial depending on your home's location and value. Furthermore, home maintenance costs should not be taken lightly, as they can accumulate quickly - this may include expenses for repairs, landscaping, or even unforeseen issues such as plumbing problems or roof leaks. Don't forget to keep utility bills in mind as well, as costs for heating, cooling, electricity, and water not only continue throughout retirement but may even increase due to increased time spent at home. Being aware of these housing expenses will not only help you plan better for your retirement but will also allow you to thoroughly enjoy this well-deserved break without any financial burdens.

Long-Term Care

Long-term care is an essential consideration when planning for your future, as the expenses associated with it can be quite significant. Being prepared for this financial burden alleviates stress and ensures that you or your loved ones receive the care and support they need. As you age, the likelihood of needing assistance with daily living activities, such as bathing, dressing, and eating, increases. To ensure financial stability for yourself or a loved one who may require long-term care, it's crucial to assess the potential costs and develop a plan to cover these expenses. This can include saving diligently, investing wisely, or purchasing long-term care insurance. Moreover, researching the availability of government programs, such as Medicaid, can provide you with additional resources to manage these costs. By proactively preparing for long-term care expenses, you pave the way for a comfortable and secure future with access to the essential services you may need.

Choosing to retire does not mean that all financial responsibilities cease. It often means there are new and different ones to meet. Retirement can present a lot of new and exciting opportunities, but it's important to be prepared for potential health care costs, taxes, long-term care expenses, housing expenses and the overall cost of travel when deciding if you're ready for retirement. Taking the time to understanding the costs involved in retirement can give you a head start on managing money more efficiently as you embark on this next chapter of your life. Researching and getting familiar with options like tax deductions, Social Security benefits and other government programs that may be available to retirees can also provide added peace of mind. Finally, if you want some guidance in creating a retirement budget don't forget to consult an experienced professional financial advisor who understands your specific retirement goals and needs. If you prepare ahead of time, spending in retirement does not have to be a scary proposition. Being proactive about creating a robust financial plan will chart the course for many years of enjoyable retirements experiences!

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Every Day is Saturday

Our job begins where most advisors stop—saving money is great, but how do you spend it without risk in retirement? Welcome to Every Day is Saturday with Brad Gotto and Matt Stahl, partners and private wealth managers at Fiat Wealth Management.

In this podcast we help guide you to think about your money in a practical sense and make the boring and complex financial decisions, fun, informative and educational. Join us on this journey where Brad and Matt will explore different strategies on how to spend your money without guilt and have peace of mind knowing you are spending it the optimal way in retirement.

You’ve saved money for a lifetime. Now it’s time to spend it.

In Spending Money and Having Fun, Retirement Income Certified Professional Brad Gotto teaches you how to be smart about spending so you can stop worrying and live the life you want. Old habits are hard to break, but Brad helps you embrace the counterintuitive and build new habits to support your next chapter. You’ll learn how to:

  • Change your mindset around spending

  • Create boundaries that buy you freedom

  • Gain peace of mind with concepts that take the guesswork out of your financial requirements