One of the biggest misconceptions out there is that spending and expenses decrease after retirement. Most people think that seniors have less expenses, so they spend less. After all, they no longer have a houseful of kids that need clothing, tuition, holiday gifts, etc. It makes sense, right? But, real-life studies and hard data show that it’s simply not true.
According to a study done by the Employee Benefit Research Institute, 46% of seniors spend more money, not less, on living costs during their first two years of retirement, and 33% of retired households’ expenses continue to increase for six years after going into retirement.
Why is that?
There can be multiple reasons for this phenomenon, such as the loss of a salaried income, or an increase in travel expenses. But the main areas where there is a sharp increase in expenses for seniors is housing and healthcare. These are the two spending categories that hit senior adults the hardest financially.
There are multiple ways seniors can make sure not to overspend in those areas. Through careful planning and various pre-emptive strategies, seniors can avoid the crippling expenses that can come up after retirement.
How to minimize housing costs: Retirees 75 and older spend 43% of their savings on housing expenses, including property taxes, homeowner’s insurance, and other home-related expenditures, according to the Employee Benefit Research Institute. Many retirees find that downsizing their living space makes the most significant contribution to a healthier budget. Another option available is to move to an area with a lower cost of living. (see Where You Live Matters)
How to minimize healthcare costs: USA Today reports that retirees spend an average of 11.4% of their income on health care. Because medical situations and their attendant costs are unpredictable, medical costs are one of the key reasons seniors need to plan for healthcare expenses during retirement. A financial adviser specializing in retirement planning can provide many additional ways to preserve wealth through insurance and investment strategies.
One such strategy involves a life settlement, or the sale of an unneeded life insurance policy.
A life settlement can turn a money-draining policy into a valuable asset. Hidden Gem Life Solutions specializes in purchasing existing life insurance policies, and any senior seeking to budget for retirement expenses should be informed about the growing popularity of such settlements by their life insurance agent or financial advisor.
To learn more, and to keep your clients informed, contact a Hidden Gem life settlement representative today.