Retirement Plan: 10 Expenses to Consider

Part of the process of determining if you can afford to retire, is to run the numbers to see if the amount of money you have saved plus any expected income you may receive from pensions and Social Security will cover all of your expected expenses throughout retirement.

After working with people for so many years, the one thing I have noticed is that many people have faithfully kept spreadsheets of their day-to-day living expenses and have used those figures to help create their retirement plan.  People often come to me to check their thinking, when they are a few years away from retirement, to make sure they are on track to retire.

However, I often discover that people overlook the irregular expenses when planning for retirement on their own.   And it is the irregular expenses that can derail a retirement plan, and cause stress and sleepless nights.  The tricky thing of course is trying to see into the future and figure out what possible expenses can occur.

Here is list of some of the potential items that you might consider adding to your retirement plan.  They won’t all pertain to you, but I hope they will get you thinking about what your retirement could look like, and help you plan for your future.

Replacing cars

I often hear people say that they will just use the same car throughout retirement.   And if you do not work with retired people on a regular basis like I do, I can see where you might think that.  When you are pre-retirement age, retirement seems like a phase of life that is a mysterious unknown.  So I ask them how often they replace their car, and I usually hear answers like every 6 years or every 10 years, and everything in between.  A married couple that retires at 65 and drives until 85, replacing cars every 6 years,  will buy 6 cars in retirement.  I wrote a blog about the impact of inflation on car prices in retirement, many people are very surprised when I show them the expected price of the last car they will buy in retirement.

Travel for fun

When I ask people what they want to do when they retire, travel is one of the first things people say.  If you see travel in your future, think about how often, and what type of travel, do some internet searching to get a ball park estimate of the cost that would be involved.

Travel to see the grandkids

Don’t forget about travel to see the grandkids, I mean your adult children.  Who am I kidding?  You are taking a trip to see those adorable grandkids!  If your family is like so many these days, you might have to hop on a plane to feel those little arms wrapped around you.  With Skype, you don’t have to be there to see them anymore.  But no technology can replace an in-person visit.   Trust me; you will want to plan for this expense.

50th Wedding Anniversary Celebration

In this day and age, fifty years of marriage is an especially wonderful milestone.  Some families have a dinner reception, inviting extended family and close friends, which can be the size of a small wedding reception.  I have also seen couples treat families to Disney vacations or to cruises.  If you have dreams of recognizing a milestone with a special celebration, don’t forget to plan for it so that when the time comes, you can relax and enjoy it.

Medicare

What?  It isn’t free?  No, I am sorry to have to tell you, it isn’t.  And I find that I am often the first to break this news to people.   Because if they have never had to help a family member through the process of signing up for Medicare and they are more than a few years away from retirement, then researching “How does Medicare work?” usually hasn’t crossed their mind.   Luckily there are some good resources such as www.medicare.gov and for Missouri residents https://missouriclaim.org/.

Long Term Care/Nursing Care

In 2012 the average annual cost of care in a nursing home in Missouri is approximately $55,000.  The cost of nursing care has been increasing considerably faster than inflation.   One way to offset the risk to your portfolio is to consider Long Term Care insurance that would cover a portion or all of the cost of care, depending on your risk tolerance and the affordability of the premium.  I am a fee-only advisor so I do not offer insurance products, but I have recommended that some clients get Long Term Care insurance.  Other clients have been able to self-insure, each situation is different.  But you do need to consider the impact a stay would have on your portfolio.  To learn more read my blog post Long Term Care Insurance: Protect your nest egg.

Big delayed purchases

Have you been dreaming of a cross country trip in a motor home?  Or does the water call your name so a boat is more to your liking?  Don’t forget to set aside some money for upkeep and repairs.

Home Improvements and Major Maintenance

If you are in your forever home, factoring in the large inevitable maintenance projects such as replacing a roof or HVAC system will help prevent money stress later on down the road.  Also, after a few decades, kitchens and baths tend to need updates.  Remodels with an eye toward aging gracefully in place are also becoming quite popular.  Consider the age of your home and prior remodels when planning future income needs.

College and Wedding/Rehearsal Dinner

Depending on the age of your children, you may have college and wedding/rehearsal dinner expenses in retirement.

Care for a Family Member

Will a loved one be financially dependent upon you, such as a parent or a special needs child?  If so, you might consider meeting with an elder care attorney or estate planning attorney that specializes in special needs trusts.

These are a few areas to consider in addition to everyday living expenses when you are creating your retirement plan.

 

Financial Doing: Because if it’s just Financial Planning, it will never happen!

I have a theory that just about everyone has important financial To-Do items sitting on their To-Do list.  However, those financial To-Dos often just sit there because there isn’t a looming deadline to make them seem urgent (“Save for college and retirement?  Oh that’s so far away!”).  You can read more about my philosophy in      It’s on your To-Do. Let’s get it To-Done!

Let’s say you decide to address those To-Do items so you create a financial plan.  Well a plan will not help you if you do not implement it!  So let’s take you from Financial Planning to Financial Doing!  For those of you who have taken the step of creating a plan, I would like to give you some easy things to do so that you can get some momentum going on your path to Financial Doing!

Here are some quick things you can do and knock off of your To-Do list…

Social Security

If you are under 60 years old, the government does not mail you a Social Security Benefits statement any more.  Learn how easy it is to pull up a copy of your statement online in my blog post Full Social Security Statements Now Available Online.

Annual Credit Report

You know you should get your free copy of your credit report each year, but with so many advertisements you aren’t sure where to go.  I clear up the confusion in my blog post Annual Credit Report: Where to go to get your free credit report.

Lost Money

This one is just a “no brainer”; it takes only a few seconds to check to see if you have lost money.  One in ten Missouri residents does.  Are you one of them?  Missouri Unclaimed Property: Are you due some money?

Take the first step today to change your Financial Planning to Financial Doing, I promise, it will feel great to finally start attacking the To-Dos!

MOST – Missouri 529 College Savings Plan Offering Matching Grants

The MOST – Missouri 529 College Savings Plan recently announced that they are offering a dollar-for-dollar match up to $500 per year per account up to a $2,500 lifetime maximum for qualified accounts. This is a privately funded grant, rather than funded by Missouri taxpayers.

Qualifying for the MOST – Missouri 529 College Savings Plan Matching Grant
In order to qualify for the matching grant, you must meet certain criteria. Quoting from the website https://www.missourimost.org/ :

* Applicant must be a parent or legal guardian of the beneficiary.
* Both you and the beneficiary must be Missouri residents.
* You must be the account owner of a MOST 529 account.
* The beneficiary must be 13 or younger (when you are first approved for the matching grant).
* Your household Missouri adjusted gross income must be $74,999 or less.

You must submit an application by June 30th. You will be notified by August 31st if you receive a matching grant. The matching funds will be applied to the account January 31st. You must reapply each year.

For details and to get the application, go to https://www.missourimost.org/.

Saving for college
There is $125,000 available for the matching grant program per year over the next four years for a total of half a million dollars. With the high cost of college constantly in the news, and frequently on the minds of parents, this seems like a no brainer if you are a Missouri resident with a child under 13 and an income under $75,000.

Investing
College can be so expensive; it makes sense to create a nest egg to offset as much of that cost as you can. People are often surprised to learn how much small regular investments can grow to over time. If you save $40 a month (think of it as just $10 a week) for 18 years assuming 6% annual growth you would have $15,611 for college. Length of time invested is such a terrific boost to your investment, the longer you have the better. However – being invested is the most important factor. The key is to get started.

FAFSA: Missouri deadline approaching

What is the FAFSA?
FAFSA is the abbreviation for Free Application for Federal Student Aid. It is the form that you complete when applying for financial aid.  Financial aid is awarded as grants (you do not pay it back) and/or student and parent loans (you do pay it back, with the exception of loan forgiveness programs.)

Should you fill out the FAFSA?
Yes. When working with higher income households, people often indicate that they do not intend to complete the FAFSA. I encourage them to fill out the form, so that they may keep their options open. If their student applies to a private school, they may qualify for aid directly from the school. Private schools often have their own pool of funds to draw from when awarding aid to students, and create their own processes for awarding aid. However, completing the FAFSA is usually part of the process as well as the school’s own financial aid form. Public schools sometimes have awards to give as well, and part of the procedure at some of these schools is having a completed FAFSA form, so keep yourself in the game and fill out the form by the deadline in order to keep your options open.

What is the Missouri FAFSA deadline?
The FAFSA deadline for the 2012-2013 school year for Missouri is April 2, 2012. However, each school can have their own deadlines for priority award consideration. As an example, Mizzou’s FAFSA priority deadline was March 1, 2012 in order to apply for money that the University of Missouri had to give. If you missed that deadline you still have time (until April 2, 2012) to apply for money from state and federal programs. Being aware of each school’s individual FAFSA deadlines is a good opportunity for your student to practice their research and organizational skills. The best strategy is to complete the FAFSA as soon as possible after the first of the year. Watch the mail for W-2s and other tax forms that you will need.

Where can you go to get FAFSA questions answered?
The US Department of Education’s website www.fafsa.ed.gov is a great place to go to find out deadline information and get questions answered about the FAFSA form.

Michele Clark in the news: Washington Family and Calgary’s Child

As a financial advisor and the mother of two boys, making sure that kids understand real life money concepts is important to me.  Habits around saving, investing, and philanthropy can be established when children are young.  So I was pleased to share some ideas which were highlighted in two magazines recently. I was quoted in the January 2012 issue of Washington Family magazine in the article “Starting a Piggy Bank Teach Savings Early” and in the January/February 2012 issue of Calgary’s Child magazine in the article “Help Your Kids Be Money-Savvy.”