At Broadmoor Court in Colorado Springs, Colorado, we encourage our residents to plan for the unexpected. When you save as much as possible, sudden expenses become minor inconveniences instead of stressful emergencies. Saving money also allows you to get out and enjoy all that Colorado Springs has to offer, from the Cheyenne Mountain Zoo to the Colorado Springs Pioneers Museum. Here are seven common retirement expenses you should include in your budget.
Assisted living communities offer many services and amenities, but you still need to save money for your health care expenses. If you have Medicare, for example, the Part B premium costs $164.90 per month, or nearly $1,970 per year. This premium comes out of your monthly Social Security or Railroad Retirement Board payment, but it's important to account for it in your budget, as the deduction leaves you with less money in your bank account.
The premium is just what you pay to have Medicare coverage, so you also need to think about co-pays, deductibles and other out-of-pocket costs. If you have Original Medicare paired with a Part D prescription plan, you don't enter the Part D catastrophic coverage phase until you've reached $7,400 in out-of-pocket drug expenses for the year. Catastrophic coverage reduces your prescription co-pays, but you have to spend a large sum of money before it goes into effect, making it important to plan ahead.
Assisted living makes life easier by bundling many services together for just one monthly fee. That said, you need to think about expenses that aren't part of the base service package. For example, if you go on a day trip to a local attraction, you'll need money to pay the admission fee, eat lunch and buy souvenirs. You may also need to pay for personal services, such as hair styling or dry cleaning.
The amount of tax you owe during retirement depends on many factors, such as your annual income and the types of retirement accounts you have. Some accounts are tax-deferred, which means you don't pay tax on your contributions until you start withdrawing money. Other accounts, including the Roth IRA, are funded with after-tax contributions. That means you've already paid income tax on the money and don't need to pay it again when you make a withdrawal. If you expect to owe income taxes, it's easier to save a little bit every month than to come up with a large sum of money when the tax comes due.
Many assisted living communities provide transportation to medical appointments and off-site activities, but that doesn't mean you don't need to include transportation in your budget. You may need to go somewhere that isn't on the community's transportation route, or you may want a little more flexibility in terms of arrival and departure times. When you make your budget, don't forget to include bus or train fare. If you can't get where you want to go via public transportation, set aside some money for Uber, Lyft or another ridesharing service.
If you plan to help your children or grandchildren with some of their expenses, you'll need to plan ahead. It's not unusual for seniors to give financial gifts to their loved ones, but it's important that you don't give away so much that you can't meet your own needs. When you're doing your budget, think about how much help you want to offer. A few dollars here and there may not make much of an impact, but if you want to help with the down payment on a home or cover your grandchild's private school tuition, you'll need to save as much money as possible each month.
The need for professional services doesn't go away just because you've moved to a senior living community. In fact, older adults may need more professional services than younger people do. For example, if you don't already have a will or advance health care directive, it's important to meet with an attorney and get your legal affairs in order.
You may also benefit from hiring a certified public accountant or professional tax preparer to help you reduce your tax burden and ensure you file all required forms on time. To plan for these expenses, get some quotes from professional service providers in your area and then determine how much you need to put aside every month.
Retirement is the perfect time to relax and visit all the places you never got to see while you were working. But to travel in style, you'll need money for airplane tickets, hotel accommodations, restaurants and other expenses. To ensure you have enough money, choose a destination and research the local prices. When you determine how much to save each month, give yourself a buffer. Prices change frequently, so the cost of your dream trip may increase substantially between the time you set up your budget and the time you're ready to leave.