Retirement can be expensive. It’s hard enough to calculate how much money you’ll need to live, let alone how to plan for hidden costs. Here a few common unexpected expenses and how you can plan for them.
Everybody knows that medical insurance premiums rise steadily with age, but they jump suddenly from 65 onwards – often reaching the point of being unaffordable.
While the simplest solution might be cancelling your policy, this may mean a longer wait for major, non-urgent surgery, which in turn might lead to a poorer quality of life while you wait.
Having more free time for activities you enjoy is something to look forward to in retirement, but the cost can soon add up.
The best way to manage this extra spending is by making sure you know all the costs involved in the activities you’re planning – be it membership fees, entry prices to events equipment costs.
Buying or borrowing second-hand equipment and using coupons and vouchers to receive entertainment discounts may help reduce these expenses.
You may plan to spend your retirement volunteering for your preferred charity, with the assumption that this is a cheap way to spend your time.
However, there are costs involved. You won’t be paid and possible expenses include travel and/or covering outgoings for the organisation due to its limited resources.
Make sure any contributions you make are within your means and don’t feel obliged to match others.
Everyday expenses, such as electricity and other utility costs, can be surprisingly high in retirement simply because people spend more time at home.
Make sure you have the cheapest plan appropriate for your needs and don’t be afraid to haggle!
Vehicle expenses can also increase unexpectedly, as you have more free time for visiting people and places. If you have access to public transport, you can reduce travel costs by using a SuperGold card and travelling during off-peak periods.
When you’re making financial plans for retirement, it’s helpful to consider the costs you’ll incur and then plan for them – you may find speaking to retired friends or family members helps you identify these.
As always, the best way to manage unexpected costs is to save more than you think you’ll need.
For those who are cash poor, but asset rich, a Heartland Bank reverse mortgage can help them cover unexpected costs by releasing equity tied up in their home. See how we’ve already helped countless Kiwi seniors make the most of their retirement by reading some of their testimonials.
FYI – above text has been italicised on request from JUNO Investing to show it wasn’t part of original article.
*This is an edited version of an article written by Dr Claire Matthews, Massey Business School Director of Academic Programmes, and published by JUNO Investing. Neither Dr Claire nor JUNO Investing endorse Heartland Bank’s reverse mortgage product.