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Retirement expenses: Plan ahead

Investment adviser Clayton Alexander said long-term care, caring for family members, home repairs and transportation are often overlooked retirement expenses people should plan for, rather than dismiss.

Good retirement planning takes many factors into account, but with so many costs to consider it can be overwhelming. Thus, people may forget some retirement expenses that are less visible now or downplay others that they think will be unlikely or infrequent.

But the retirement expenses you miss, dismiss, or underestimate in your planning could prove costly.

“Even for those who prepare thoroughly for retirement, they can’t predict with complete accuracy across the board how much they’ll spend,” Clayton Alexander said.

Alexander is an investment adviser and founder of Teton Wealth Group.

“The retirement expenses you forget to plan for, or ignore, could seriously cost you and help sabotage the kind of retirement you were otherwise planning to have.”

Alexander goes over some key retirement expenses that may fly under the radar years in advance of retirement but nonetheless should be planned for:

Long-term care

This can be one of the most expensive costs during retirement. Many people don’t plan adequately for it because they’ve been healthy throughout their life. Statistics point out the importance of planning for long-term care.

The U.S. Department of Health and Human Services lists the average cost of a semi-private nursing home room at $6,800 per month. The HHS also says that 70 percent of retirees will need long-term care at some point. Medicare won’t cover long-term care, and if one doesn’t qualify for Medicaid, the patient is responsible for the bill.

“It’s easy to ignore the thought of needing long-term care when you have many years of working left and have been healthy,” Alexander said. “But it’s a reality for many in their last years. One way to prepare is building the expenses into your retirement fund by using a Health Savings Account. Or you can buy long-term care insurance before you retire in order to get better rates.”

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Caring for family members

Retirement ideally is a time to relax and enjoy one’s newfound free time, but nearly one-third of seniors say they serve as a caregiver. That can strain the budget, so Alexander said it’s important before you retire to think about how much you’re able to help family members and budget that amount annually.

Home repairs and renovations

These aren’t the everyday costs you plan for when creating a retirement budget, but they’re inevitable and could take a large bite out of your budget.

The U.S. Bureau of Labor Statistics reports that the average person 65 and older spends about $2,300 per year on home repairs and maintenance. A major expense such as a new roof is a big hit. “Building an emergency fund is essential,” Alexander said. “It’s prudent to put aside two or three thousand dollars a year in your retirement budget for home repair and maintenance costs.”

Transportation

Retirement planners say this is a sneaky expense that is easy for retirees to underestimate. Transportation costs represent 16 percent of expenditures for adults 65 and older, according to the Bureau of Labor Statistics.

“It’s one of the most under-planned items in retirement, but the costs can really bite you,” he adds. “It goes beyond buying a car [as there is] gas, maintenance, insurance, repairs and public transportation costs. Even if a retiree no longer has a car payment, financial advisors need to factor in these types of costs.”

Alexander said it’s difficult to cover every scenario, “but adhering to a careful plan laid out well before the retirement years can help one handle the unexpected costs, as well as the ones that are easy to overlook and add up.”

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Clayton Alexander is an investment adviser and founder of Teton Wealth Group. A graduate of Dixie State University with a B.A. in administration, Alexander focuses on building holistic retirement plans.

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