There
are some upsides to being a retiree - senior discounts, lower taxes,
subsidized healthcare, and regular Social Security checks among them. On the
other hand, mature Americans must contend with worrisome issues such as
rising costs for medical care, long-term care, prescription drugs, and even
basic necessities such as food and energy.
To determine your monthly expenses during retirement, you might start by
dividing costs into two categories: those you believe will change and those
you believe will remain largely the same.
Costs You Believe Might Change
Housing expenses - particularly if you plan to live in your paid-off home
or plan to downsize to a smaller dwelling
Medical insurance - which may shift from a premium for HMO coverage to a
Medigap policy
Costs for dependents - if you have children you believe will be
self-sufficient by the time you retire
Entertainment and travel expenses - for some people, these might decline
precipitously; for others, they might be far higher
Taxes - most retirees find their combined tax burden is less than during
their working years
Automobile-related costs - retirees generally drive less than workers who
commute to their jobs every day, thus spending less on maintenance, tolls,
gasoline, etc.
Monthly contributions toward retirement savings accounts - not only can
you stop making this contribution, you might even consider spending it!
Costs You Think Will Remain the Same
Food
Clothing - unless you previously spent large amounts of money on uniforms
or other job-specific wardrobe items
Household expenses - such as telephone, utilities, cable, etc.
Determine Your Individual Needs
Once you analyze all this information, you can determine your estimated
monthly income needs as well as how large of an emergency fund to establish.
This fund should be held in a liquid form such as a money market account,
which provides stability for your funds as well as ready access to them.
Consider reviewing your estimated needs at least annually, because
circumstances can and do change in today's fast-moving world.
