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3 hidden costs that could sabotage your retirement – The Motley Fool



As you prepare for retirement, you'll have to settle dozens of expenses. How much will you spend on hobbies and other activities? What about traveling? How will your daily living costs change?

Approximately three-quarters of prospective retirees expect their National Retirement Institute's cost of living to either decline or remain the same, according to a survey by the Nationwide Retirement Institute. While it's true that some of your spending may go down or be eliminated altogether (for example, you no longer have to spend money on dry-cleaning your work clothes or buying expensive lunches in the office), there are a few hidden costs that can affect your expenses If you do not prepare for it, the whole plan has gotten out of hand.

  Fall foliage under which dollars hide

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1. Long-term care

According to the Ministry of Health and Social Services, seven out of ten pensioners need care at some point in their lives, and the average person in need of long-term care is expected to do so for around three years.

And it is not cheap. An average semi-private room in a nursing home costs around $ 6,800 a month – or about $ 81,600 a year, according to HHS. At this rate, a three-year care costs around $ 244,800.

Medicare usually does not cover long-term care. While it usually covers short stays in a qualified care facility, when care is medically necessary, it does not pay for care – including support for basic activities such as dressing, bathing, and eating. This means that if you need long-term care, these costs will probably have to be paid out of pocket.

The majority of retirees will eventually need long-term care, so you should prepare for it. If you do not believe that you can afford hundreds of thousands of dollars out of pocket, consider taking long-term care insurance to cover part of the financial burden. Insurance coverage is expensive (the average 55-year-old couple pays about $ 2,000 a year in premiums, according to the American Association for Long-Term Care Insurance). However, if you need several years of care, you can save thousands of dollars in costs.

. 2 Other healthcare costs

The average retiree pays around $ 4,300 a year out of pocket, according to a study by the Center for Retirement Research at Boston College.

While most retirees are eligible to enroll in Medicare at the age of 65, you are not financially off the hook. Medicare coverage also covers all premiums, deductibles, coinsurance and co-payments. In addition, Medicare does not cover all costs, so you may still have to expect expenses.

Original Medicare or Parts A and B cover hospital care and physician visits, but not routine care (such as tooth or vision) or prescription drugs. While most people pay no premium for Part A, the monthly standard premium for Part B is $ 135.50. In addition, you pay a deductible for parts A and B. If you need Part D for prescription drugs, this will cost extra.

Instead, you can opt for a Medicare Advantage plan that offers higher coverage. but at a steeper price. Benefit plans are offered by private, Medicare-approved insurance companies, so tariffs vary based on location and desired coverage.

Regardless of which type of health insurance you choose to retire, it is important to prepare for it – these costs are somehow – you can not count on Medicare to cover them all.

. 3 Controlling Payments of Retirement Savings

When you review your retirement savings, you can easily assume that the amount you have in your account is the amount you must spend. Depending on the nature of your retirement account, Uncle Sam may take some of your income.

If your savings are kept in a Roth IRA, you do not have to pay any taxes on withdrawals, as you have already been taxed on your contributions in advance. But with a 401 (k) or traditional IRA, you can expect to pay income taxes on the money you withdraw in retirement.

Similar to how you were taxed in your working years, your income taxes are based on the amount you pay. earn again. When you retire, your earnings include the amount you deduct from your retirement account each year. Before you retire, it is important to understand which tax code you are in:

Tax Rate For unmarried persons, taxable income via: For married couples filing jointly, taxable income above: 19659023] 10% $ 0 $ 0
12% $ 9,700 $ 19,400
22% $ 39,475 $ 78,950
24% [$84200[1965903432% $ 160,725 $ 321,450
35% $ 204,100 $ 408,200
37% $ 510,300 $ 612,350

Source: IRS2.00 – and expensive – milestone. Prepare for the daily costs, but also consider the main costs. The better you are prepared, the less financial surprises you will experience.


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