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Life Events Finances, both income and expenses, can undergo significant changes during retirement. To demonstrate the concept, this page discusses several of the common Life Events that a retiree may see. Life Events are important because they can affect the income or expenses of a retiree by as much as $1000 per month, so taking these changes into account should be a major part of the decision to retire and should definitely be a part of a retiree's financial planning.
Medical InsuranceMost folks enjoy pre-retirement medical insurance policies provided for and supported by their employer. After retirement, however, many of these plans stop, provide significantly reduced coverage, or have significantly increased premiums. Either way, maintaining full medical coverage can result in an increase of retirement expenses.Generally speaking, individual medical coverage is available at a cost of $500-$1500 per month per person. Prices vary significantly from state to state or from company to company. These expenses can be one of the most difficult to estimate of all retirement expenses. Social SecurityAlthough there are considerable differences in Social Security benefits, depending on the contributions made by the individual and their age, the Social Security Administration makes it easy to estimate your future benefits. On request they will send you a written summary of your contributions and of your benefit options.Social Security benefits can begin as early as 62, but monthly payments increase as you defer the start of benefits to a later age. In general, long life tends to favor starting benefits early, whereas a shorter life span generates more benefits by starting benefits at a later age. There are other factors which can affect this, so use it's best to make the decision in the context of a full retirement plan. CarA car is a non-trivial expense, and can consist of the following items, which can easily add up to $500-$1000 per month per car!
For most retirees the mileage associated with going to work goes down, but increases in travel often offset the effect so that the expenses of car ownership are not affected. A retiree can help reduce expenses by deciding to keep and maintain cars for extended periods of time - such as for 8 years instead of 4-5 years. This avoids having a continuous car payment but is offset somewhat by generally increased car maintenance costs. The most significant impact comes when a retiree reaches an age where driving has become a physical impossibility (for such reasons as eye difficulties). Usually this does not happen until the retiree is in their 80's, so the expense reduction associated with no longer owning/driving a car is associated with an age beyond which most Americans expect to live. Retirement CenterRetirees may chose to make a lifestyle change - moving from a house to a retirement center for a number of reasons, including:
Retirement Center prices vary a great deal, ranging from about $1000-$3000 per month per person. While the cost of the center is relatively high, the move to a center is typically accompanied by the sale of a house which is used to offset the expense of the center. Some retirees resist moving to a Center whereas others look forward to the benefits of living in a center. The decision should be faced early on and the retirement plan should reflect a conscious decision as to the retirees decision as to living in a Retirement Center. Full-Time CareThe cost of full-time care can easily reach $5K-$10K per month, an amount that often exceeds the ability of retirees to cover. This is particularly true when the spouse of the ill retiree continues to generate normal or even tightened expenses of retirement.... more to come ...
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