The real cost of retirement
In the last few years, we've seen inflation and the cost of living rise significantly. With that in mind, determining how to prepare financially for retirement can be daunting. While we can't say for sure what it costs to retire, we can use trends and data to get a good idea of how much money to anticipate needing in our retirement years.
According to the Bureau of Labor Statistics (BLS), retiree households (led by individuals aged 65 or older) spent an average of $60,087 in 2023. This translates to roughly $5,007 per month.
It's important to note that these are averages. Some retirees spend significantly less, while others spend much more.
It's important to note that these are averages. Some retirees spend significantly less, while others spend much more.
Key expenses include housing, which is typically the biggest expense and encompasses mortgage/rent, property taxes, insurance, and maintenance; transportation, including car payments, gas, insurance, and public transportation; healthcare, which tends to get more expensive as we age, including health insurance premiums, doctor visits, prescriptions, and long-term care expenses; food, including groceries and dining out; and entertainment, which are hobbies, travel, and social activities.
Factors that influence or could potentially change those costs are location, inflation, and your personal spending habits or needs. Historically, inflation causes prices to double every 18 years. While we hope we don't see a big spike in the cost of goods and services in the near future, nothing is certain.
We generally advise replacing 70-80% of your pre-retirement income with a regular distribution from investment accounts or pensions for retirement years. To determine how much you'll need, it's helpful to speak with a professional investment advisor and consider your potential needs. You may want to use a free online tool to predict your life expectancy, then factor in how many of those years you'll be retired.
When you determine your goal, remember, interest is your friend. You most likely won't be able to set aside enough money to retire, so investing is one of the best strategies to help your money grow and support your post-retirement lifestyle.
If you'd like to speak with an investment advisor representative, please call us or fill out our online form. We offer a complimentary consultation to help you determine your financial needs in retirement and a roadmap for getting there.
Investing involves risks including possible loss of principal.
