Maintaining Financial Independence: 4 hidden expenses of retirement

Consider the following four commonly overlooked expenses in retirement that could take a bite out of your nest egg if not properly planned and prepared for in advance.

1) Healthcare

According to Fidelity Benefit Consulting, a 65-year-old couple retiring in 2014 will need an average of $220,000 to pay for out-of-pocket medical expenses in retirement, such as insurance premiums, co-pays and out-of-pocket expenses and prescription drugs. This does NOT include long-term care and this figure only applies to retirees who have traditional Medicare insurance coverage. When planning retirement, be sure you have at least an extra $220,000 saved to cover these often-unexpected out-of-pocket expenses.

2) Long-term care

One average, more than one out of two adults will require some form of long-term care assistance in retirement. The average cost of a nursing home in Nevada is $228 a day for a shared room and $246 for a private room. In-home care is $137 a day, adult day care is $50 a day, and an assisted-living facility could cost more than $3,200 per month. A long-term insurance policy or rider could pay for a large portion of these expenses, dramatically protecting your nest egg.

3) Cost of living

Even though you’re retired, you will still need money to live. Plan on having extra money for a new car, home repairs, travel and leisure activities in retirement. Thirty years of golf or road trips can quickly add up. When planning your retirement income, consider both what you need in retirement as well as what you want from retirement, and save accordingly.

4) Taxes

Rarely does the cost of taxes go down. Even though your tax bracket may be lower in retirement, it doesn’t mean that the rates will stay that way forever, or that your circumstance will not change as you age. Be sure to take into account the potential increase in tax rates, and do what you can to defer or limit your tax liabilities on your retirement savings.

Be sure to protect the money you do have saved from the hidden expenses in retirement and be sure to set aside enough to have peace of mind and quality of life as you age. By planning for both the expected as well as the unexpected, you can be more confident that you will achieve and maintain financial freedom throughout your retirement years.

This information is for educational purposes and should not be considered specific financial, tax or legal advice. Always consult with a qualified advisor regarding your individual circumstances. Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.

Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He covers personal finance for the RJ. His blog is published every Monday. For more information visit www.SafeMoneyAdvisorsNV.com or connect with him via Facebook and LinkedIn.