Will Your Spending Go Up or Down in Retirement?

Mike Gann Retirement Planning

As you get closer to retirement age, you’re probably getting more and more excited about being able to spend time doing all the things you’ve wanted to do. Retirement is an exciting time in most people’s lives. But if you haven’t planned for your post-work years, it can also be one of the most stressful times in your life. Having a sound financial plan for your retirement is key to ensuring you spend your golden years the way you want to.

As you start thinking about your financial goals for retirement, you may be under the impression that you’ll spend less money once you retire. In fact, it’s not uncommon for people to factor a 70 percent or 80 percent reduction in spending during retirement. That assumption is sometimes wrong.

Worried that your spending expectations for retirement may be off? Below are a couple of common things people encounter that increase their spending in retirement. You may want to think about these factors as you plan your retirement so you can avoid spending too much too fast.


Health Care Costs

Your employer-sponsored health care plan may be comprehensive. You may have few out-of-pocket health care costs. Transitioning from this plan to Medicare can be a bit jarring for some people. While Medicare is a good program, it won’t cover all the medical costs you’ll encounter in retirement.

In fact, Fidelity estimates the average retired couple can expect to spend $260,000 on out-of-pocket health care expenses.1 That’s a big number, and if you’re unprepared to shoulder that financial burden, you might want to look for ways to reduce your risk. For example, you could consider contributing to a health savings account (HSA) that offers a tax-advantaged way to save for medical costs.



Taxes don’t stop just because you stop working. If you’re like many workers, your taxes aren’t that noticeable right now because they’re taken directly out of your paycheck. In retirement, however, you may feel the pain of paying taxes a bit more acutely.

You will likely pay taxes out of your Social Security, pension payments, retirement account distributions or other forms of income. It’s important not to forget that distributions from your 401(k) and traditional IRAs are taxable. As you construct your retirement budget, consider that you will likely face taxes on much of your income.


Discretionary Spending

When you retire, you will probably have more time on your hands and more money to spend than you are used to. This can create problems. Some retirees find themselves filling up their newfound free time by traveling, shopping, dining out or taking up expensive hobbies. While there’s nothing wrong with spending your hard-earned money, you may want to make sure it’s within reason.

Creating a budget is a good way to make sure you don’t overspend in retirement. Project your income and expenses so you can make informed buying decisions. Think of creative ways to spend your time without burning through your budget. For instance, you could volunteer, spend time with family or explore budget travel options.

Ready to develop your retirement spending plan? Contact us at Advantage Retirement Services. Let’s talk about it. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.





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