As you plan for retirement, you’re probably focused on establishing a steady stream of income. You want to make sure you have enough money to live. But another way to look at the equation is to consider the money going out of your pocket. Once you enter your retirement years, watch out for these common money wasters.
Spending too much on health care. Health care is often the largest expense faced by retirees. Your basic Medicare plan won’t cover everything you need; in fact, you will pay 20 percent of the cost of many medical expenses, with no out-of-pocket limit. The answer to this problem often lies in a Medicare supplemental plan. But beware that these plans are not all created equally. Shop around and perform careful research before choosing one.
Spending too much on housing. It’s unlikely that you still need that sprawling, five-bedroom house anymore. Downsizing to a smaller home can free up some income, and also save you money on maintenance and repairs.
Overusing your credit cards. It’s best to enter retirement free of credit card debts. Then, try not to charge anything that you can’t pay off within thirty days. You should have a credit card for emergencies, but not for everyday shopping. Remember that over time, interest essentially raises the price of everything you purchase. When you’re living on a fixed income, paying too much for everything you buy is a bad idea.
Purchasing a brand new car. Now that you don’t have a daily commute, you can spend less on transportation. A brand new car depreciates quickly in the first two years that you own it, making a slightly used car a much better deal.
Eating out every night. It can be tempting to save yourself the time and hassle of preparing dinner at home, and opt for restaurant meals instead. But even if you spend only 20 dollars eating out each night, that’s 7,300 dollars over the course of one year!
Carrying too much life insurance coverage. The point of life insurance is to replace your income in the event of your death. If you no longer have children to raise or a large mortgage payment, you might be carrying too much life insurance. Remember to perform an annual insurance audit, to make sure your policy adequately meets your needs.
For more help with budgeting in retirement, or for information on other questions you might have, call our office at (781) 995-0253 to schedule an appointment.
Portions of this article have been excerpted from 7″ Retirement Money Wasters to Avoid” by Jeff Rose, U.S . News Money.