A solid retirement plan requires a lot of preparation and consideration. The closer I get to retirement, the more I truly understand how easy it is to overlook a few key factors when curating your future budget. Along with your day-to-day expenses, here are five categories to prioritize in your retirement savings plan.
1. Housing
Consider paying off your mortgage if you can. This is a significant chunk of money that can go toward other expenses. However, even without a mortgage payment, you still need to budget for housing expenses, such as taxes, insurance, home maintenance and potential repair costs. Another option to consider is downsizing.
2. Entertainment
To live your dream retirement lifestyle, including your hobbies and passions (like travel!), designate a realistic amount in the entertainment portion of your budget. Take advantage of senior discounts to save in this area!
3. Health care
Health care expenses can often exceed Medicare coverage, especially for surgeries or extended hospital stays. Payment for preventative or routine care—like a new pair of glasses—may come straight from your pocket. Take your current health condition, as well as family history, into account when planning for this expense.
4. Emergencies
Build up an emergency fund so you can keep your budget intact when an unexpected expense arises. Whether a car or home repair, or a medical bill not covered by insurance, life can come at you fast!
5. Taxes
Retirement, unfortunately, is not an escape from paying taxes. While seniors can qualify for certain tax breaks, new tax rules for retirees that went into effect in 2024 may hit your budget. For example, one new tax mandate requires some people receiving Social Security benefits to pay federal income taxes on this money. There are qualifications and limits for several of these new tax rules, so be sure to discuss your specific situation with a financial professional.
Bonus planning tip: If donating to meaningful causes is important to you, don’t forget to add charitable giving to your retirement budget.