When
it comes to budgeting for retirement, several expenses fall away at retirement
which, in turn, can reduce your post-retirement expenditure and provide some
financial relief.
However,
there are a number of expenses which may increase either at retirement or
during retirement which should not be overlooked. When putting your post-retirement
budget together, consider the extent to which any of the following may
increase:
Healthcare
Your
medical aid premiums are not age-rated which means that your age is not a
factor when it comes to premium increases. However, medical inflation – which
is generally around CPI +4% per year – is a very real threat to your retirement
savings and should be carefully budgeted using future cashflow projection
modelling. The result of medical inflation outstripping consumer inflation
year-on-year is that your healthcare costs are likely to account for a larger
portion of your overall expenditure over time.
Besides
medical inflation, retirees can expect to spend more on healthcare costs such
as medical appliances, walking aids, hearing and visual aids, nutrition,
vitamins and supplements, and supplementary healthcare services – many of which
are either not covered or only partially covered by medical aid. As you age,
illness, disability or mental incapacity may mean that you require higher
levels of care in the form of assisted living, home nursing or frail care, and
these costs – being particularly high – may be difficult for the average
retiree to budget for.
Another
factor worth considering is that many gap cover providers have a higher premium
for members over age 65, so be sure to account for this when budgeting.
Hobbies and entertainment
With
more time on your hands, keeping yourself engaged, active and socially
connected will be important, and it is possible that spending more time on your
hobbies and social activities will cost more. When doing your budgeting, be
realistic about how much you will spend engaging in your hobbies, eating out,
taking day trips, attending the movies or theatre, entertaining at home,
gardening, and home improvements, as these costs all add up. Importantly, you
don’t want to find yourself in retirement and unable to afford your hobbies and
social engagements, so be sure to incorporate these costs into your budget.
Pets and vet care
For
many retirees, having companion animals is important to them and, thankfully,
many modern retirement homes are making allowances for retirees to keep small
pets such as cats and dogs. Pet food, vet care, medication, medical treatment
and pet accessories can be pricy, especially if faced with large, upfront vet
bills.
If
you intend to travel during retirement, keep in mind that you may have
additional pet care expenses such as dog sitting and dog walking. As such, it
is important to ensure that you have sufficient discretionary funding in
retirement as large, upfront vet expenses may be difficult to finance from your
retirement drawings.
Travel and experiences
Travel,
both local and international, is a high retirement priority for many retirees
and, if you want to enjoy your travel goals and bucket list destinations,
budgeting for these expenses is essential. Travel generally becomes more and
more difficult as we age and, as such, retirement plans normally factor in
higher travel expenses in the first decade of retirement, tapering out as one
ages and becomes less physically mobile.
If
you have adult children living overseas, your travel expenses may be somewhat
higher especially if you intend to visit frequently and stay for longer periods
of time. As your ability to travel internationally slows down, you may find
yourself spending more frequent local travel, so these costs should be factored
in.
Again,
paying for overseas travel will require access to larger capital amounts than
would be affordable from your monthly retirement drawings so you will need to
ensure that you have sufficient discretionary funds, keeping in mind that
withdrawals from your discretionary investments may trigger a capital gains
event, so be sure to build these withdrawals into your retirement planning.
Home renovations and adaptations
As
one ages, it may be necessary to modify or renovate your home to accommodate
your physical needs. If you suffer from a disability or physical incapacity,
you may need to make home adaptations to allow for ease of movement. Such
modifications could include building a walk-in shower, installing a raised bath
or toilet, installing handrails and wheelchair ramps, widening doorways to
accommodate wheelchairs, or installing non-slip floors. It may also be
necessary to budget for vehicle modifications.
Levies and security
If
you plan to live in a retirement village, townhouse complex or life rights
village, you can expect to pay monthly levies which may be considerable
depending on the utilities on offer. With this in mind, it is important to do
your upfront homework and research so that you know exactly what your levies
will cover.
Check
whether the levies cover services such as refuse and waste, cleaning, building
maintenance and upkeep, laundry services, garden upkeep, and security. Some
levies also include a set number of meals per month, access to onsite clinics
and nursing facilities, libraries, clubhouses and clubs, so find out exactly
what you will be receiving in return for your monthly levies, and what you need
to budget for separately.
If
you plan to continue living independently for as long as possible, you may want
to spend some money upgrading your home security system, so consider what this
would cost, both upfront and in the form of armed response.
Technology and online entertainment
Staying
connected with loved ones and friends – especially if you have loved ones
living overseas – means staying technologically updated and relevant. This
means regularly upgrading your hardware and software in the form of
smartphones, smart TVs, computers, laptops, tablets, headsets and other
devices, and keeping yourself connected to the internet. Online entertainment
in the form of Netflix, Showmax, Britbox, DSTV and other subscriptions all add,
so be sure to budget for them.
Reading
Again,
with more time on your hands, it’s likely that you’ll spend more time reading
during your retirement years in the form of books, e-readers, magazines,
newspapers and other publications. There are ways of reducing these costs such
as making use of libraries, joining a book club, making use of pensioner
discounts, and shopping at second-hand bookshops.
Charitable giving
With
more time on your hands, many retirees get more involved in their Church,
charities and NGOs and you may be tempted to spend more on your charitable
giving than your budget allows. What is important is to ensure that your
charitable giving has been budgeted for and that it doesn’t compromise your
future retirement. Remember, there are tax deductions available for donating
towards a registered Public Benefit Organisation, so find out whether your
charity is registered accordingly.
Family and grandchildren
Most
grandparents long to spoil their grandchildren whether in the form of money,
gifts or experiences. If you plan to assist financially with the education or
extracurricular costs of your grandchildren, be sure to incorporate these
intentions into your financial planning objective setting so that it can be
budgeted for, bearing in mind that there may be tax implications if making
donations to others.
Source: moneyweb