Countless workers look forward to their retirement. However, this period is also an expensive prospect that catches senior citizens off guard. According to the U.S Bureau of Labor Statistics, the average senior spends about $46,000 a year during their retirement and with the average retirement length at 18 years, you can project that the typical retiree would need at least $828,000 to pay any bills they have once they leave the workforce.
The challenge with planning for your retirement is determining exactly what expenses you will have during that time. It is also important to consider that while the average retirement in the US is 18 years if you happen to retire early, that number could be 25-30 years or more. With that said, here are some of the most common retirement expenses that every senior citizen should plan for.
Housing might constitute as the single largest monthly expense both during your years in the workforce and in retirement. The U.S BLS reports that housing costs the average retiree $1,322 a month, but that number can double or even triple depending on where you live in the country. Luckily, there steps you can take to keep your housing costs low. The first step is to pay off your mortgage before retire which would eliminate that monthly cost. Your next step would be to downsize to a smaller home that would be easier to maintain. Keep in mind, that a 1,500 square-foot home would cost less in upkeep than a home whose size is 3,000 square feet. Another option available would be to rent an apartment rather than owning a home. Through renting, you can eliminate expenses associated with homeownership such as property taxes, maintenance, and repairs.
The average retiree spends close to $500 a month, but a multitude of medical issues can increase that monthly payment. Most seniors do not expect healthcare to be so expensive during retirement, and part of the reason for this is the fact that Medicare is not free and fails to cover many of the services seniors need. Most people enrolled with Medicare do not pay a premium for Medicare Part A which covers hospital stays, Parts B and D do charge a monthly premium to cover diagnostics and prescriptions respectively. Along with that premium, you must pay for deductibles and copays for any services you use. You also need to consider the services that Medicare does not pay for such dental, vision, and hearing aids.
Medical bills are inevitable for all seniors, but some of may be able to avoid the expense of long-term care which refers to the on-going care needed to allow patients to function. Experts estimate that 70% of seniors 65 and older will require some form of long-term care in their lifetime making it an expense you need to plan for. Genworth Financial’s 2017 Cost of Care Survey reported that the average assisted living facility in the US costs $3,750 per month, or $45,000 a year. Meanwhile, the average nursing home is $235 per day amounting to $85,775 per year for a shared home and $267 per day ($97,455 a year) for a private one. Obviously, when it comes to a nursing home, having a roommate will help you keep costs down, but you are better off investing in long-term care insurance during your 50s and 60s as it could help cover the costs you might face otherwise. This policy will come with a price, and the average long-term insurance policy annual premium costs about $3,490 which would amount to $87,250 over the course of 25 years.
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David S. Chang is an entrepreneur, wealth manager, keynote speaker, consultant and Chairman/CEO of Chang Holding Company. David is also the editor of The Art of Thinking Smart, a blog and finance column in The Star-Advertiser’s weekly Midweek with a readership of over 400,000 people. He is also proud to serve as an Intelligence Officer in the Hawaii Army National Guard.
A longtime expert in finance, David uses his executive roles in various companies under Chang Holding Company in order to help people achieve their personal financial and business goals throughout all phases of their lives:
A wealth management firm (which has become ranked as one of the top in the nation and featured in Forbes)
WealthBridge Private Equity
A private equity and venture capital fund
Care for Life
A private-duty home and senior care company
Other companies under Chang Holding include GreenTech Pacific LLC and Pacific West Import/Export Hawaii.
David S. Chang is the founder of The Art of Thinking SMART, The Art of SMART Money, and The Art of SMART Stocks. He created the Simple 4-Step System to Wealth and Financial Freedom. Supported by over a decade of research and driven by David’s desire to help others excel in all areas of their lives, this step-by-step online training program enables people to take control of their wealth immediately.
Everyone should have a financial plan, regardless of age, income or net worth.
David has always loved to learn and seek out opportunities to achieve the American Dream– so it comes as no surprise that he has taken numerous continuing education courses in finance, investments, and insurance. He also completed the Chartered Financial Consultant® (ChFC®) program at The American College.
In 2015 David was chosen as a member of InvestmentNews’ 2015 40 Under 40 list of top young advisers and associated professionals in the financial planning industry. He has been featured in Forbes as one of America’s Select Financial Leaders. In 2013, David S. Chang was selected as 40 Under 40 Military by CivilianJobs.com, 2011 Pacific Edge Young Professional of the Year, 2010 Business Leader of the Year from the Pacific Business News Forty Under 40 and 2011 finalist for The Business Leadership American Savings Bank Business Leader of the Year.
In addition, WealthBridge Inc. was selected as a FIVE-STAR Wealth Manager for the State of Hawaii in 2014 through 2011, representing the top 2% of Wealth Managers statewide. In 2014 through 2012 WealthBridge Inc. was also selected by The National Association of Board Certified Advisory Practices (NABCAP) as a Premier Adviser.