Retirement Expenses that are Often Overlooked

A general rule of thumb says that you will need approximately 70-80 percent of your pre-retirement salary to live in retirement. This line of thinking is based on the assumption that retirees will have fewer expenses and, therefore, will need less money. Once you retire, you will no longer be paying FICA taxes and contributing to 401(k)s and IRAs, and making mortgage payments if your house is be paid off.

But what you save in these expenses can be replaced by spending on other expenses. Here are four important often overlooked and underestimated retirement expenses:

* Free time. Many individuals fail to factor in the amount of free time they will have in retirement. When you are working eight hours a day, five days a week, you are making money, not spending it. However once you retire, you now have an additional 40 hours per week of free time to fill — every week for the rest of your life. That’s a lot of time sitting around the house all day watching television or reading a book. Without a job to go to, every day is like a Saturday. You can go to the movies, have lunch or buy clothes. You can do whatever you want. One could easily spend an extra $20 per day, which over the course of a year is $5,000. If you originally planned on living on $50,000 a year, spending an additional $5,000 would increase your living expenses by 10 percent.

* Unexpected expenses. A new roof for your house.