Retirement planning can't be all about saving enough to see the world and spoil your grandkids, although you'll certainly want to make sure you have the cash to do those things.
The reality is that seniors continue to face a lot of expenses after leaving the working world. Unfortunately, many people forget to factor in some of the most costly and important ones when setting savings goals.
Whether you're decades away from giving notice or weeks away from leaving the workforce for good, you'll want to make sure you have a plan to cover these four big expenses.
For a senior couple retiring this year, healthcare could cost around $325,000 in retirement, when factoring in Medicare premiums and out-of-pocket costs on prescription drugs. Medical care alone can be enough to drain almost your whole nest egg if you aren't prepared for it.
So it's a good idea to have a dedicated retirement account, such as a separate IRA or a health savings account if you're eligible for one, with money earmarked for medical needs in your later years. You should also research all your options for care in retirement, including Medigap and Medicare Advantage Plans to get coverage well suited to your needs.
Taxes don't disappear once you're no longer getting a paycheck. In fact, as many as half of all seniors pay taxes on their Social Security benefits while most are also taxed on retirement account distributions.
Unfortunately, taxes can take a big bite out of your nest egg and many people forget to consider their impact. With close to one-third of retirees wishing they had planned better for their tax obligations, factoring them in when setting your retirement goals can save you from a lot of financial pain later in life. You can do this by investing in a Roth IRA to keep your tax bill lower, or by saving more in a traditional IRA or 401(k) to account for the extra you'll need to pay the government.
3. Long-term care
Long-term care could run you more than $100,000 per year if you need to go into a nursing home and want a private room. Unfortunately, there's as much as a 70% chance you'll need some type of custodial care as a senior. And Medicare won't pay for any of it if you just need basic help instead of skilled medical services.
To prepare for this colossal expense, you'll either need to factor it in when setting retirement savings goals and aim much higher, or you'll need a long-term care insurance policy.
4. Providing family support
Studies have shown parents collectively provide more than $500 billion in financial assistance to young adult children. This can quickly eat away at your retirement savings, but it's hard to say no if your loved ones need you. To make sure you don't drain your retirement accounts by providing for your kids, you'll either need to set firm limits on the support you offer or raise your savings goals to account for whatever financial help you want to give your children as a retiree.
Make sure you've got enough saved to cover these crucial expenses
While it's easy to forget to save for healthcare, taxes, long-term care, or helping out the kids, not factoring in these costs can undermine all your careful retirement plans. As you set savings goals and determine how much to invest in your retirement accounts, consider the amount you'll need to cover these potentially substantial expenses. If you do, you'll ensure you have a nest egg that's large enough not to run out when you need it most.