If you're gearing up for retirement, chances are you've already started crunching the numbers on how much it takes to fund your lifestyle.
You've probably thought about the cost of regular bills like housing, healthcare, and utility. Yet there are some sneaky expenses that may slip under the radar.
We've jotted down two expenses you should keep your eye on, so you don't have to deal with too many financial surprises later.
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1. Home repairs and maintenance
Now, you've probably accounted for mortgage payments, property tax bills, and homeowners insurance in your retirement savings plan. But it's those unexpected home expenses that can throw a wrench in your financial plan.
If you've ever had to deal with a leaky roof, plumbing issues, furnace repairs, or anything of that nature, you know it can come with a hefty price tag. According to Angi's 2023 State of Home Spending Report, the average American shells out a whopping $13,667 a year to fix up his or her home.
You might want to consider a separate emergency fund specifically for home repairs and maintenance. A general rule of thumb is to sock away 1% to 4% of the value of your home for these type of costs. For instance, if your home is valued at $400,000, you might budget anywhere from $4,000 to $16,000 a year for upkeep. If your home is on the older side, you'll probably want to aim for the higher end of the range.
If you're looking to rack up rewards points, consider exploring the best high-limit credit cards. You might stumble upon a card offering a 0% introductory APR, which means you'll be able to make purchases interest-free for a set period, say 15 months. You won't need to dip into your emergency fund immediately, since you'll have extra time to pay off your balance. So if you have your emergency funds in a high-yield savings account, your money can continue to grow until you use it to pay off your bill. You'll just want to keep an eye on your credit score to make sure your credit usage doesn't get too high.
2. Car insurance
Car insurance is one expense that often flies under the radar, especially if you're used to paying it only twice a year. But this is something you don't want to forget about, since car insurance is typically required in most states. And if you're thinking about purchasing a new car when you retire, you want to research how to get car insurance, so you'll know what to expect during the process.
Recent data from Ascent shows that the average American driver forks over $3,017 per year for car insurance. Now, that's no small chunk of change for anyone, but it can be especially difficult to afford if you're living on a fixed income. With the average monthly Social Security retirement benefit sitting at $1,907 as of January 2024, and housing gobbling up a big portion of your budget, there's not a lot of wiggle room for extras if you have limited savings and don't plan ahead.
Plus, as you get older, insurance rates start to creep up even more. So make sure you inquire about discounts if you don't plan to drive as much as you did when you were working.
If you haven't wrapped up your career yet, you still have time to rework your budget to factor in these costs. Maybe you can save more money in your bank accounts or beef up your 401(k) and IRAs. Or consider building your emergency fund now for expenses associated with your home and car. The sooner you start planning for these expenses, the more prepared you'll be to tackle them during retirement.
