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May 23, 2012


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What I have learned from my parents is have your house paid for or down shift to a paid off house or condo. There are some bills that will change or you never have had. 25 years ago my parents did not have a cell phone and there limited cable was eliminated so they needed to upgrade to basic just to get back what they wanted.They finally gave up on e-mail and computers. They just don't use it enough to justify the expense where as I will probaly need this.

The biggest change was when GM declared bankruptcy and changed there pension plan for retirees. This shook my dads confidence in that he is dependent on that pension not changing.

If smart phones are the latest along with Ipads and ereaders, who knows what will be available and what will change in the future. There may be an expense that is not known or available yet.

Taxes will go up. You will earn less, but taxes are going up. Will you pay more? My guess is that you will pay about the same.

I agree with the less tax. I think taxes will only go up for the upper class. Unless you are making over $250k in retirement you will probably pay less in taxes.

income taxes will go down but real estate taxes may continue to rise after retirement (especially here in New Jersey)

I don't see expenses going down a lot in retirement. I guess it depends on your lifestyle. But really, life costs *a lot* if you want to travel and live a leisurely life during retirement. Both my parents are retired and tell me retirement *costs* way more than we think. Regardless of some expenses going up.

Actually, paying for "conveniences" may go up. As you age, or lose a spouse, you may not be able to handle tasks around the house that you did before. Mowing is hard work, even changing a light bulb can be difficult. I'm only in my 40s, but having lost my husband a year ago, I'm finding that many things he did routinely are very difficult for me. I see this getting worse as I age

The first priority is to retire Debt Free with your home paid for and have your kids be totally self supporting.

If you have a very large regular IRA, when you reach 70 1/2 you have to start taking money out every year. This is a taxable event no matter what you do with the money. It is by far the largest taxable item of income that we have and is why we pay far more in taxes now than we did when we retired in 1992.

From 1992 through 2010 we had some very expensive foreign vacations - however that's one of the reasons we saved. Retirement is wonderful and sure beats the hell out of working even though I loved my work. Added expenses have been cable TV, Internet, and Netflix but all three are necessities of life for us.

Healthcare is not a large expense but it does increase every year. Currently I have $298/month taken out of my pension that pays for membership in the best clinic in the SF Bay Area for us both, and which is absolutely superb. Doctor visits are $20 for our PCP and $40 for specialists. Tests are included and a 3 month supply of a prescription is under $20 for generic and $50 for brand names that are still under patent. If you plan on relocating when you retire make sure that if you are in an HMO that you really like, that it is available in your county. If you are thinking of retiring in a foreign country give a lot of thought to the healthcare issue. It doesn't matter how healthy you are now, if you live to a ripe old age you will eventually need some expensive procedures.

I don't pay anyone to do anything for us around the house, at 77 I am very fit and can easily do it all myself. My wife is 79 and while not as active as she was, between us everything gets done.

Actually our "Giving" has gone up substantially. Not because of me I hasten to add, but my wife received a $200K inheritance this year and feels a need to be extra generous to the children and to organizations such as NPR and PBS that we enjoy listening to and watching.

I want to add to what Old Limey said - my mother-in-law who is retired is living on the same pension money for the last dozen years (from her dead husband's long time employer) but the amount she pays for her share of health insurance has risen every year and is now over 50% of the monthly pension payment. So as a retiree her living costs have gone up significantly (and I am not including the out-of-pocket medical expenses she pays).

I think my expense will stay about the same. We'll pay less tax, but also health care and some other expense will go up. I think many people get bored with a free schedule and spend more money to fill the time. One of my older friend is always taking up new hobbies like owning a horse, model helicopter, and such. He was like that before retirement though so...
Hopefully we can avoid that trap.

I agree with it being convenient and cost efficient to not have a mortgage once you retire. However, what about those of us who haven't/won't stay in one place long enough to purchase a house before retirement? And have no idea where we might want retire 20+ years from now to get a head start on owning something (plus, we do not want to be long distance landlords in the meantime.)

I'm hoping we'll know where we want to stay about 5 years out from retiring and can purchase and pay off something then. At least that's the plan, along with saving up a large down payment.

The one unplanned expense we are encountering in retirement is care of my +90yo mother with early-stage dementia. She needs more and more care; the cost of which greatly exceeds her income. She lives in an assisted living facility and her monthly shortfall is paid for by me and DH. (I have a sibling who cannot currently help with the costs, another story for another day)

We never put this possibility into our "numbers" before, as we assumed (incorrectly) that her living to near 100 was improbably. So much for that assumption!

So even though "you no longer need to support your kids", the sandwich-generation issues still exist. We are now in the process of revising our estate plan to make sure her costs are covered, before anyone else gets an inheritance.

Savings and taxes are the major differences. When your'e retired you no longer have to save the 10-15% towards retirement. You no longer have to pay the 7.65% FICA taxes. Plus when you are retired your social security is not taxed for most people either. Taxes should be significantly lower for most people in retirement even if they jack up tax rates in general. Plus theres really no politicians calling for tax hikes on low/middle income retirees.

I'm with Joe. I'm planning for retirement with the assumption that our post-savings (as in after 401k and IRA contributions) expenses will be the same in retirement. Our mortgage will be paid off but I assume that will be offset by increased healthcare premiums (since it will no longer be employer-subsidized) and increased travel/fun expenditures (due to more free time).

Great post with a lot of considerations to think about. I recently was asked what I wanted my annual income in retirement to be and it is so hard to predict. At least these items give me a starting point!

If you currently own a home, with a mortgage, and are a long way from retirement it will no doubt be prohibitive to move to one of the states that have very high home prices. You also don't want to spend your golden years as a renter if you can help it. This is a dilemma that the sooner you start acquiring information and making tentative plans the better.

You may or may not realize that the amount of energy you have between 50 and 65 will be a great deal less when you are 75 and over. We bought our current home in 1977 when I was 43 and we are still living in it at 77. The very idea of having to pack up all of our belongs and move across country would have been daunting at 58 when I retired but now it would be impossible. After living in the same home all these years we have everything just the way we like it, and the same goes for our garden into which I have poured an enormous amount of hard work and quite a bit of money over the 35 years we have had it. Property taxes are also very low in California for long time homeowners, mine are only $2,239/annum on a home appraised at about $1M which is a big disincentive to relocate. I also know all the ins and outs of the house and can fix just about everything that ever needs fixing. I read about many Easterners becoming snowbirds during the severe part of the Winter but I am sure there are problems involved with leaving a home unoccupied for months on end, maybe break-ins, burst pipes, snow & ice damage etc.

I am able to remain on my ex employer's group insurance plan which makes a large difference even with medicare. Healthcare becomes a larger & larger concern as the years go by, especially with the dysfunctional government that we have.

We have two friends that moved into an assisted living development largely because the wife was fed up with cooking and cleaning. They used the proceeds from selling their home to buy into it. Now the husband is very seriously ill and too sick to go back to the assisted living development and is stuck in a skilled nursing facility for maybe 100 days which is all Medicare pays for. Meanwhile his 80+ year old wife has to drive a long way on the freeway to visit him every day. After 100 days who knows what they will do. I'm sure they rue the day they impusively gave up their nice, paid off, home.

@Old Limey, I was under the impression that the assisted living developments were associated with a nursing home. At least the ones I have been aware of on the east coast and in Michigan. Interesting.

I'm not retired, but our auto expenses decreased a TON when we both started working from home. Gas is around $3.55 a gallon right now, but we are staying under $150 a month instead of the $300-$400 we were spending. I let the insurance company know about our new mileage and our monthly car insurance premiums went down $30 a month. Our toll road expenses dropped from $120 a month to about $20. It's just been great. :-)

This particular assisted living development is basically for elderly people of normal health that like having a nice dining room that serves 3 meals/day and that offers many activities. You buy into it at various levels ranging from an apartment to a condo or up to a villa and it's quite expensive. You pay a high monthly fee that covers meals, laundry, maid service etc. Upon your death your unit is put up for sale and a certain percentage of the proceeds is returned to your estate. They have facilities for members that may temporarily need some nursing care after a normal discharge from a hospital but this individual had been in the hospital ICU for a lengthy period and was hooked up to various pieces of equipment as well as being being fed intravenously before being moved to a less expensive skilled nursing facility covered by medicare for 100 days. This particular development is in a beautiful area with great views but you have to drive on a busy freeway to get anywhere. It was one of those cases where the wife called all the shots and the husband wasn't enthused but went along with it.

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