When we think of retiring, many of us will dream of more free time to explore hobbies, see those [eventual] grandbabies, and perhaps travel. We’ll think of things like who we’ll see, where we’ll go, and how we’ll fill those suddenly empty hours.
But we’ll also have to think about how to fund that dream-retirement scenario—how will we pay for health insurance, continue to afford veterinary bills for man’s best friend, and afford trips on a lower income?
Social Security will help, and hopefully you’ve saved over the years to support retirement. But while many expenses—like food and household bills—are fairly predictable, there are bound to be a few surprises that come up.
Here are a few sneaky costs that may surprise you…
Taxes
Even without a regular full-time job, taxes still apply in retirement, though they may look a bit different. Income tax still applies to any sources of income you have. This means that any Social Security you draw on is taxed, as are any pension disbursements and withdrawals from eligible 401(k) and IRA accounts. Depending on your exact assets, you may also find yourself facing estate taxes and required minimum distributions (RMDs). Property taxes still apply as well, though the exact rules will depend on your specific location.
Selling a home
While many retirees continue to age in place, some decide to downsize or move to a different location. While it stands to reason that you should acquire a decent amount of money when selling your home, the sale can come with expenses as well—particularly in the way of capital gains, depending on where you head next. Consult with a professional to understand in advance any costs you may encounter, as well as to determine whether you may be eligible for an exemption.
Dental and vision
While there are a variety of Medicare plans and options to support seniors’ physical health, you may be surprised to find that many don’t cover dental or vision. As both should be in the “must-haves” column to ensure optimal health, plan accordingly.
Technology enhancements
Technology will continue to evolve, as will the associated costs. Just consider the costs of having a phone now compared to 30 years ago—it’s no longer a simple landline bill, the price of a single device can be upwards of $1,000, plus a phone line that’s likely triple what it used to be. Add on other advancements, such as televisions, streaming services, and vehicle technology and safety enhancements, and it’s easy for costs to creep over time.
Estate planning
Having a plan comes with a price, and while you’ll hopefully have minimal revisions to your will and estate plan, should you need to make changes, the legal fees can quickly climb. Minimize costs by limiting revision cycles.
