June 04, 2021
3 Big Expenses in Retirement
There are 3 Big expenses that you need to think about as you move into retirement.
1. Health care – on average according to the latest statistics, a 65-year-old couple retiring today will need about $300k to cover their health care cost. That does not even take into account long-term care costs. Long-term care costs can easily run $8,000-$14,000 a month if you have a loved one in a nursing home. According to the latest statistics, the average stay in a nursing home is about 2 and a half years. And current statistics say 1 out of 2 individuals will need nursing home care. One of the biggest expenses that maybe you haven’t thought about as it relates to retirement is, how are you going to cover health care costs? Not only just health insurance, medical costs, but also long-term care cost.
2. Taxes – The second big thing to think about in terms of expenses is taxes. Taxes in retirement. Taxes are a cost. Ang it’s an increasing cost especially if you have pre-tax accounts like IRA’s and 401k’s because of a couple of different reasons. First of all, you have to take the money out of those accounts and you’ll be taxed on that once you reached 72. Whether you like it or not you have to pull money out of these pre-taxed accounts and pay the tax. And the tax, a lot of people think will be going up in the future base on all of the spendings this country has done in the last couple of years especially with the pandemic. So if the taxes go up the value of those accounts goes down.
3. Lifestyle – this is probably one that you have taught of but you might not necessarily have a plan is your lifestyle expenses. What is your lifestyle? Are you going to be traveling? Are you staying at home? Are you helping out the kids or the grandkids? How much do you need monthly to cover your lifestyle? And as part of our 5 step process or Retirement Legacy Blueprint
where we look at Legacy Planning, Health Care Planning, Tax Planning, Investment Planning, and Income Planning, making sure that we are covering your lifestyle cost.
These are the 3 biggest expenses in retirement.
If you want some help addressing any of those just reach out to us.
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.
Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.
With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.
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Episode Transcript
Retirement Expenses
Hello, this is Chris Berry with Castle Wealth. And today we’re going to talk about three big retirement expenses that you need to consider. If you like this information, please make sure to subscribe and like our YouTube channel.
Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications, such as Ford’s, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and has authored the Amazon best-selling book, The Caregiver’s Legal Guide.
So with that, we’re going to talk about three of the big expenses that you need to think about as you move into retirement. And these are probably obvious, but we need to talk a little bit more about them. And the first one is healthcare. And when I’m talking about healthcare, I’m not just talking about health insurance, but I’m also talking about longterm care. On average, according to latest statistics, a 65-year-old couple retiring today will need about $300,000 to cover their healthcare costs. That does not even take into account longterm care costs. And that’s from Fidelity study.
Healthcare
And so if we need to allocate $300,000 to healthcare, what about longterm care as well? Longterm care costs can easily run $8,000 to $12,000, $13,000, $14,000 a month if you have a loved one in a nursing home. And according to latest statistics from Genworth, the average stay in a nursing home is about two and a half years. And current statistics say one out of every two individuals will need nursing home care. That’s just nursing home care. It’s not taking into account home care or assisted living when we’re talking about longterm care health care. So one of the biggest expenses that maybe you haven’t thought about as it relates to retirement is how are you going to cover healthcare costs? Not only just health insurance, medical costs, but also longterm care costs.
Taxes
The second big thing to think about in terms of expenses, and this is something we’ve been beating this drum, banging this drum for a while is to think about taxes in retirement. Taxes are a cost. And it’s an increasing cost, especially if you have pre-tax accounts like IRAs and 401(k)s because of a couple different reasons. First of all, you have to take money out of those accounts. And you’ll be taxed on that. Once you reach 72. It used to be 70 and a half, but now with the Secure Act, we’re pushing it back to 72. So whether you like it or not, you have to pull money out of these pre-tax accounts and pay the tax. And that tax, a lot of people think will be going up in the future based on all of the spending this country has done the last couple of years, especially with the pandemic. So if the taxes go up, the value of those accounts go down. So that’s something to keep in mind.
Lifestyle
And then third expense and this is probably one that you’ve thought of, but you might not necessarily have a plan is your lifestyle expenses. What are just your lifestyle? Are you going to be traveling? Are you staying at home? Are you helping out the kids or their grandkids? How much do you need monthly to cover your lifestyle? So how much income do you need per month to cover this? And this is where, as part of our five-step process, our Retirement Legacy Blueprint, where we look at legacy planning, healthcare planning, tax planning, investment planning, a lot of the times the foundation we start with is income planning, making sure that we’re covering your lifestyle costs.
And this is a big difference from when you were working, when it was all about accumulation and you had wages coming in to cover your lifestyle cost, and then any savings would go to your accumulation in saving. Well, now, as you move into retirement, you don’t have those wages, maybe you have a social security and the pension, but then we have to draw down on our assets and create an income plan to cover your lifestyle expenses in retirement.
So the big three expenses in retirement, lifestyle expenses, healthcare and longterm care costs, and taxes. And if you want some help addressing any of those, just reach out to us. And if you like this information, please make sure to subscribe to our YouTube channel. Thank you so much.
Castle Wealth Group has clients across the nation and helps families plan, protect, and preserve what is important by creating a Retirement and Legacy Blueprint.