Wise retirement planning begins long before you give your boss two weeks’ notice about your last day on the job. It involves analyzing current expenses, anticipating future outlays and making sure you will have enough income to cover them all. But beware of certain expenses that may thwart your best-laid plans. On a typical retirement budget work sheet, you’ll see lines for “miscellaneous” or “other” items, probably somewhere near the bottom. It’s easy to gloss over this section once you’ve assessed your income needs for such basics as housing and health care. But when you get down to the details of filling in the blanks, these add-ons can account for a significant portion of your retirement spending.
Consider these four situations that might put a strain on your retirement budget if you’re not prepared.
- Say your retirement dream includes purchasing a new boat and hitting the Madison lakes, purchasing some hunting land or starting a new business to pursue a dream. Even if your only real passion is playing golf, your retirement plan should include a way to pay for it. It is especially easy for spending on hobbies and recreation to get out of hand during the early years of your retirement. Make sure you include these in your retirement budget so there are no “surprises”.
- Also consider how much room you’ll need in your retirement budget for home improvements –whether it’s renovating your kitchen or bath with universal-design features, putting a master suite on the first floor or replacing an old roof. The one thing you shouldn’t count on is taking on a major debt — like a home equity line of credit or second mortgage — to finance desires during retirement.
- Helping your adult children financially is probably the biggest budget squeeze on couples who have entered retirement. Some who are still saving for retirement have put their future income at risk by helping their child purchase a home or pay for other expenses. Maybe your college kid has picked a major with dubious earning prospects, or you have an adult child who is already in financial trouble. If you know you could never resist a request for a helping hand, you’d better plan to have enough cash on hand to cover your generosity.
- Caring for elder parents is also a notable financial burden at times. A serious illness might have the parent moving in with you or needing help to pay medical bills or for nursing home care. Or you might be pitching in to pay bills, buy groceries and take care of household maintenance for a parent who is struggling financially but wants to stay in their own home. Talk about these things ahead of time. This is also a good time to discuss estate planning wishes with your parents.
What “miscellaneous items” show up on your retirement budget? Can you retire confidently knowing that you have taken these and other wild cards into consideration?