A big concern that suddenly starts coming across your mind when you’re an adult that you never even dreamed you’d think about as a young person is preparing for retirement. Because in your youth, you just assume you’ll never get old. Aging isn’t really a thing. You’re going to live forever, always be in perfect health, and never have a care in the world! And then adulthood shows up and sticks a pin in your bubble and deflates your dreams of immortality.
Once you realize the importance of planning for retirement, you usually kick off the process by grabbing a calculator, your spouse if you have one, and start crunching numbers to see just how much cash you’re going to need to keep up your current lifestyle.
You no doubt thought about the cost of your normal bills, you know, stuff like house payment, healthcare, and your utilities. However, it’s very easy to allow other kinds of expenses to slip through the cracks.
There are two in particular that you need to watch for, which, thankfully, the folks over at The Motley Fool, have written a wonderful article about to keep you from getting a nasty financial surprise later on down the road.
The first one that people tend not to think about or include when coming up with a ballpark number for how much money they will need in retirement is home repair and maintenance. You likely already accounted for your mortgage payment, home owner’s insurance, and property taxes, but having to make sudden and unexpected home repairs can wreak havoc on your retirement fund.
If you’ve ever had to deal with a leaky roof, plumbing issues, furnace repairs, or anything of that nature, you know it can come with a hefty price tag. According to Angi’s 2023 State of Home Spending Report, the average American shells out a whopping $13,667 a year to fix up his or her home.
You might want to consider a separate emergency fund specifically for home repairs and maintenance. A general rule of thumb is to sock away 1% to 4% of the value of your home for these type of costs. For instance, if your home is valued at $400,000, you might budget anywhere from $4,000 to $16,000 a year for upkeep. If your home is on the older side, you’ll probably want to aim for the higher end of the range.
If you’re looking to rack up rewards points, consider exploring the best high-limit credit cards. You might stumble upon a card offering a 0% introductory APR, which means you’ll be able to make purchases interest-free for a set period, say 15 months. You won’t need to dip into your emergency fund immediately, since you’ll have extra time to pay off your balance. So if you have your emergency funds in a high-yield savings account, your money can continue to grow until you use it to pay off your bill. You’ll just want to keep an eye on your credit score to make sure your credit usage doesn’t get too high.
The other expense that tends to fly under the radar when you’re planning for retirement is car insurance. This is especially the case for individuals who only pay their car insurance twice a year. However, you want to make sure you don’t forget to plan for this expense as it is required in most states in order to legally drive.
Some new data from Ascent has revealed that the average driver in America spends well over $3,017 every year for car insurance. That’s a pretty sizable amount of cash for any person, however it’s especially difficult to pay if you live on a fixed income as most elderly individuals who have reached retirement age do.
As of now, the usual payment a person gets from Social Security is around $1,907 and the vast majority of that gets sucked right into the bank for housing costs, thus there’s very little, if any, wiggle room in a retiree’s budget for extra, unexpected expenses, like car insurance. Not to mention the price of insurance increases as you get older.
“If you haven’t wrapped up your career yet, you still have time to rework your budget to factor in these costs. Maybe you can save more money in your bank accounts or beef up your 401(k) and IRAs. Or consider building your emergency fund now for expenses associated with your home and car. The sooner you start planning for these expenses, the more prepared you’ll be to tackle them during retirement,” the report concluded.