Everyone has their own, personalized retirement checklist that helps them with financial planning. For instance, you may be considering where you’ll want to live, whether you’ll rent or own your home and how you’ll earn income.
But nothing can throw off your saving strategy like unplanned expenses. A video from Kiplinger looks at several such unexpected developments and offers tips on how to be well prepared.
Health Care Costs
Health care costs are something no retiree should take lightly. Kiplinger’s video notes that a Fidelity Investments study found that the average 65-year-old couple will spend about $400,000 out-of-pocket on health care costs by the time they reach age 92 — and that’s not counting costs related to long-term care. Kiplinger advises looking into long-term care insurance and signing up for Medicare on time to avoid delays and penalties. Of course, you can also open an IRA or other saving product specifically dedicated to handling those costs.
The video also advises retirees to remember taxes. Even if you aren’t working during retirement, withdrawals from your traditional IRA or 401(k) will be taxed. If you don’t want to pay taxes during those later years, a Roth IRA — which holds post-tax dollars — is a good option.
Taxable Social Security Benefits
Finally, the video notes that your Social Security benefits may be taxable. Kiplinger suggests reducing taxable income to avoid triggering the threshold for such taxes and consulting your accountant. If reducing your taxable income isn’t realistic for you, you may want to simply keep this potential tax in mind as you reach your later years.
What other potential financial surprises should retirees keep in mind? Do you prefer to pay taxes on your retirement savings now or when you withdraw them?