When you hit your retirement savings goal and decide to leave the workforce, assuming that your expenses won’t change can set you up for a less-than-comfortable retirement. It can derail your careful planning and your financial readiness, causing your budget to fall off target — and that’s no way to live.
In reality, many of your expenses will go up when you retire, sometimes to surprising amounts. That’s why one of the most vital budgeting tips around is to educate yourself about these changes so you can better prepare for them.
Fortunately, the expenses that rise are pretty common among retirees, which makes it easier to anticipate what to expect. Here’s a look at 14 things that cost more in retirement and some tips about how you can save on their costs.
1. Health Insurance
Generally, health insurance costs more when you exit the workforce. You don’t get the benefit of any employer-sponsored premiums, so you’ll likely end up paying more out of pocket for your policy.
While Medicare is an asset, it isn’t necessarily inexpensive. Medicare Part A — the hospital coverage portion — doesn’t have a premium if you paid enough in Medicare taxes while you were employed. Instead, there’s just a deductible of $1,556 in 2022 ($1,600 in 2023), as well as copayments after 60 days of inpatient care.
However, Medicare Part B — the medical insurance component — will cost at least $170.10 per month ($164.90 per month in 2023). If you’re a higher-income retiree, then your premium may be higher as well. There’s also a Medicare Part B deductible of $233 ($226 in 2023). Additionally, Medicare Part B only covers 80% of most outpatient services, leaving you to pay the remaining 20% of those costs.
Plus, you have costs associated with Medicare Part D — prescription drug coverage — that can vary depending on the plan you choose and your income level. Most of those plans also have deductibles and coinsurance or copays.
If you want to save on these costs, planning is the key. If you have time to build up funds in a health savings account (HSA), that can give you a stash of cash to cover some of these costs. Additionally, maintaining your health can reduce your need for treatments and prescriptions and subsequently limit your need for medical appointments that require you to cover copays.
2. Medical Care
Along with higher health insurance costs, retirees often see their medical care needs increase over time. You may develop age-related conditions that require ongoing management, such as long-term treatments or daily prescription medications. You might also be more prone to injuries, which can increase your care needs.
In time, you might require daily care services. That could include the need for a home health aide or relocation to an assisted living facility or nursing home.
Ultimately, all of these costs add up, and they often exceed what you paid during your younger years. As with health insurance, maintaining your health as best you can is essential if you want to save. Shopping around for care can also work in your favor, as some providers charge more than others.
3. Housing
Whether your housing costs go up or not during retirement depends on a few factors. In most cases, if you need to transition into an assisted living facility or nursing home, you should expect to pay more. However, even downsizing to a smaller house could increase your monthly expenses, depending on your current home equity and property prices in the location where you want to move.
Ultimately, saving in this regard can be tricky. If you need assisted living or a nursing home, compare prices at several facilities before committing. If you’re downsizing, explore lower-cost areas or those that are closer to amenities. The latter could help you limit your driving needs and save on transportation costs.
4. Travel
For many retirees, the biggest benefit of leaving the workforce is the ability to travel more. If you plan to visit out-of-town loved ones, explore other states and countries, purchase an RV for road trips, or otherwise spend more time away from home, your travel spending will increase.
This is often true during the earlier days of your retirement. If you leave the workforce in your mid-60s, you may be fairly active. Plus, the newly secured freedom is invigorating, which may encourage you to cross more items off your travel bucket list.
Keeping these costs manageable is possible. Shop around for great travel deals, book trips during off-seasons or low-travel days, and choose accommodations with kitchens to make dining out less necessary. You can also stay with family members or friends in your destination city when possible to avoid the need for hotels.
5. Entertainment
When you retire, you typically have far more free time. You may want to head to more movies, dine out more often, spend more time at local attractions or otherwise do more outside of your home to stay busy.
It’s best to assume your entertainment spending is going to increase in retirement. Fortunately, you can keep these costs down several ways. Many attractions offer senior discounts, including those for annual passes, and some have free days for people over certain ages. Libraries are free to use, giving you a source of new books, movies and other media. Activities like walking in your local park are typically free, and you can also find meetup groups to make new friends with shared interests.
If you’re an AARP member, you may be entitled to a wide range of discounts, too. However, it never hurts to ask any establishment you visit if it offers a senior discount, so keep that in mind.
6. Hobbies
Similar to entertainment, increased hobby spending commonly arises during retirement. Hobbies are a great way to stay busy and spend time doing activities you enjoy. Plus, there are plenty you can do in the comfort of home.
If you want to save, choose a lower-cost hobby, like gardening or equipment-free exercising. For other activities, sign up for emails at your favorite related stores so you can take advantage of coupons and shop the sales.
7. Moving
In many cases, moving when you’re older costs more than when you were younger. Along with having more personal belongings, handling the heavy lifting yourself might not be an option. As a result, you may have to spend more on hiring professional movers.
If you want to keep these costs down, pare down your belongings before you move. Sell anything that’s in good condition, and donate anything that doesn’t sell. This can help you capture a tax deduction. Then, do all of the packing yourself and rent a truck. That way, you only have to pay movers for their loading and unloading services.
8. Gifts for Family Members
Typically, the older you get, the bigger your family gets. Your children may marry and have children, and their children may also marry and have children. Plus, there will be weddings, graduations and other special occasions. Or, you might decide you want to make contributions to various college funds for your younger family members.
Fortunately, traditional budgeting advice for gifts works here. Shop around, buy items when they’re on sale and start a gift fund to create a stash of cash for these moments. Also, purchase gifts in advance of anticipated events to snag the best price regardless of the time of year they go on sale.
9. Groceries
As with housing, grocery prices generally rise over time. You’ll want to plan for these costs to increase when you plan your budget. Additionally, it helps to seize opportunities to save by shopping sales, buying in bulk, using rebate apps and clipping coupons.
It’s also wise to compare prices at several stores in your area. While you may need to travel to more than one store, if the savings are significant, this could be worthwhile. Finally, sign up for loyalty programs when possible, as these typically come with rewards that help you save.
10. Utilities
Utilities are another expense category with prices that trend upward over time. Plus, if you’re home more often during retirement than you were while working, your usage may increase, leading to a bigger bill.
Contact your local utility companies to see if there are programs for seniors. Some may offer discounts or might have support programs for low-income retirees. Additionally, focus on energy efficiency at home and take every opportunity to lower your water usage. Even small changes can add up. Research various approaches to see what may work in your home.
11. Transportation
While you might assume that eliminating a daily work commute would reduce your transportation costs, that isn’t always the case. You might actually spend more time out and about now that you have free time, and that can lead to increased spending.
Look for ways to cut costs by comparison shopping for fuel and insurance. Also, explore public transit deals that reduce costs for seniors.
12. Financial Planning
Generally, retirees have a greater need for financial planning services. Along with ensuring their retirement investments will continue funding their lifestyle, they may need to manage an estate or handle various end-of-life planning needs.
Look for fee-only certified financial planners. This lets you predict the price and avoid conflicts of interest that can occur with commission-based professionals.
13. Property Taxes
Technically, property taxes don’t rise simply because you retire. Instead, they go up over time. As a result, you may end up paying more during retirement due to property value appreciation and shifting tax rates.
If you own a home, check with your local municipality about property tax exemptions, deferrals or similar programs for seniors. Many municipalities have options for lower-income seniors or those with disabilities, and these can result in significant savings. Just be aware that deferred amounts usually have to be paid if you sell the home or encounter other circumstances, and factor that into your estate planning.
14. Losing a Spouse
When a spouse passes, there are certain costs you’ll need to handle. Additionally, this can impact your income, depending on your spouse’s retirement income sources and whether there are survivorship options.
Make sure to review your and your spouse’s retirement income resources in regard to survivorship. Additionally, explore Social Security benefits if they pass, and consider purchasing a life insurance policy to handle end-of-life expenses and provide a financial buffer.
