There’s a reason we’re told to save as much of our income as possible for retirement. Social Security will only suffice in covering about 40% of the average worker’s pre-retirement earnings. Most people, however, need a minimum of 70% of their previous income to pay the bills in retirement, and that assumes an extremely frugal lifestyle.
In fact, that 70% target has long been tossed around as the degree of replacement income to aim for, but in reality, most of us will need far more than that to cover our senior living expenses. Here are three in particular that could end up costing considerably more than you’d expect.
Most seniors expect to spend a bundle on healthcare, but many of today’s near-retirees are floored by the latest estimates of what medical needs in retirement might cost. According to HealthView Services, a provider of cost-projection software, the average healthy 65-year-old couple today will spend $377,000 on medical care in retirement. That’s $188,500 a person, assuming you fall into the “healthy” category. If you don’t, there’s a good chance your costs will well exceed that figure.
The average retiree spends $15,528 a year, or $1,294 a month, on housing, but if you’re among the 30% of homeowners who enter retirement with mortgage debt, your costs might climb even higher. Even if you’re only making mortgage payments during your first few years of retirement, those extra withdrawals from savings could eat away at your nest egg at an alarmingly fast pace.
Furthermore, if you’re going to hold onto your home in retirement, it’s fair to assume that over time, your maintenance expenses will increase. The typical homeowner spends 1% to 4% of their home’s value on annual upkeep, but even if you start out around that 2% or 3% mark, there’s a good chance you’ll hit the high end of that range at some point during retirement. And if your home is worth $500,000, which could easily be the case in a more expensive part of the country, spending 1% more each year on maintenance translates into an additional $416 per month.
3. Long-term care
Here’s some bad news — that healthcare expense figure doesn’t include the cost of long-term care, which an estimated 70% of seniors…