3 Retirement Budget Busters (and how to defeat them)

Everyone knows that the biggest expense in retirement isn’t housing or food or gifts for grandkids. It’s healthcare. According to Fidelity Investments, the average retired couple can expect to pay upwards of $315,000 on healthcare over the remainder of their lives. While that’s a budget buster for sure, there are three other lesser-known costs in retirement that you can unpack and plan for.

1. Taxes on Your Retirement Income
   Some of the biggest expenses in retirement are the taxes you’ll pay on your income. That includes withdrawals from pre-tax retirement accounts such as 401(k)s and traditional IRAs. Some pensions and Social Security benefits may also be taxable.

To help save money, talk to your financial advisors about creating a withdrawal strategy that includes taxable, tax-deferred, and tax-free accounts to minimize your annual tax liability. This strategy, when properly implemented, could help keep you in a lower tax bracket.

2. Inflation. Inflation. Inflation.
   As you age, inflation will reduce your overall buying power. The money you saved will be worth less over time.
   
   To protect your money from this silent wealth-slayer, include inflation in your retirement plan. That means projecting an inflation rate of up to 4% on all future expenses. Additionally, look for inflation-protected income sources. Your investment advisor may have suggestions for you and your situation. Finally, if you’re already in retirement, you might consider a part-time job to cover some of the costs of rising inflation. Just five to 10 hours a week can add up fast.
   
   
3. Long-term Care
   As you get older, you’re going to need more help with daily chores, making food, getting dressed, bathing, and toileting. That could mean in-home nursing care at a cost of well over $100,000 a year, according to CareScout.
   
   The most effective solution is long-term care insurance. This simple, yet sometimes costly insurance option, can help protect your savings from the always-rising cost of nursing and in-home care. The younger you are, the cheaper these policies can be. If you’re already retired, ask if your life insurance policy offers a long-term care rider.