Retirement is something that most people look forward to their entire lives. You plan for it. You worry about it. You hope that it is all that you expected it to be and more in the end. Of course, no matter how much planning you do, it always seems that you forgot something. Naturally, much of your retirement planning will revolve around your finances. It is important to do everything that is in your power to adequately plan for your needs in retirement. This means taking into consideration your spending habits, your health, and so much more. There are a lot of expenses that you might not think of, so let us briefly cover three of the most commonly overlooked ones for you now.
Don’t Forget Your Taxes
As much as we would like them to, taxes simply do not go away in retirement. In fact, only Roth IRA accounts will really allow you to make income withdrawals after a certain age without paying taxes. Other than that, you will need to plan to pay taxes on much of the income that you receive in retirement. You will be taxed on the distributions that you receive from your pensions or other forms of retirement plans at prevailing income tax rates, so you will want to keep that in mind.
If you are a single tax filer that has an income of just over 39,000, for example, you would owe roughly $4,500 in taxes. When it comes to your Social Security benefits, you may find that up to 85 percent of the money that you receive is taxed. In addition, pensions from the federal income, with minor exceptions, will also be taxed. Now comes the tricky part. Some states will also tax your federal pension and retirement income as you receive it.
There is Healthcare to Consider
You also do not want to forget about your healthcare. When you stop working, your employer sponsored health plan usually terminates itself after a certain period of time. The good news is that you will likely be covered by Medicare as soon as you turn 65 years of age. However, this does not mean that you will not be paying for any of your healthcare related expenses. There are various factors to consider here, your actual long term health prognosis included among them. Some older adults remain healthy for years, while others find that they are need of more than a few doctor’s visits on a regular basis.
Keep in mind that Medicare does not cover every healthcare related expense. The most notable gaps are dental, vision, and hearing. You will be on the hook for most of those expenses. Plan for this and it should not be a problem. There are also prescription medicine expense and co-insurance fees that you may need to pay. It might be possible for you to enroll in a Medigap or Medicare Advantage Plan. This will help reduce your out of pocket expenses somewhat, but you will also have a monthly premium that you need to account for. The bottom line is that you will want to set aside some money to cover your healthcare related expenses.
Plan for Possible Long Term Care
This is something that most people do not like to think about, but it is nonetheless necessary. You or your spouse may need to go to a nursing type of care as you age. In fact, there is a 70 percent likelihood today that you will require some type of long term nursing care before you die. If you need to stay in a nursing home, the cost can soar to over $8,000 a month. To have a home health aid, the cost if over $4,000 a month. In short, these are expenses that you need to plan for. You hope you don’t need them, but you do not want to be left without the money in the event that you do.
These are just three of the many expenses that you should plan for in retirement. You will want to consider them carefully and plan for them. You also do not want to make the mistake of thinking they do not apply to you. You just never when you might need to pay for these expenses. If you don’t, then you will just have extra money to enjoy as you age.