Many people make one crucial mistake in retirement planning: They assume they'll get by on just a fraction of their former income. And that's a mistake you'll want to avoid.

You might assume that between nest egg withdrawals and the benefits you collect from Social Security, you'll be sitting pretty once retirement rolls around. But here are three reasons you could be grossly underestimating your retirement expenses.

An older person using a laptop on a couch.

Image source: Getty Images.

1. You're assuming your housing costs will be minimal

If you're on track to have your mortgage paid off in time for retirement, then you might assume that you won't spend all that much on housing once your career wraps up. But while shedding a mortgage payment could free up a lot of room in your budget, it doesn't mean housing won't cost you a bunch of money.

One tricky thing about homeownership is that there's always a cost involved, even when you own your home free and clear. You always have to pay property taxes (which could rise over time), and you'll also have to maintain your home.

If you've lived in the same home for a long time, it could be starting to age. And that could mean having to spend even more money on maintenance and repairs during retirement, not less.

2. You're assuming healthcare will be more affordable

It's a big myth that Medicare is a low-cost means of accessing healthcare. You pay a premium for Medicare (for both Part B and Part D), and you'll be on the hook for deductibles and co-pays that add to your costs.

And that's not even accounting for the many services Medicare won't pay for. Many seniors are shocked to learn that it won't cover the cost of a routine dental cleaning. It also won't pay for eye exams. Meanwhile, your healthcare costs could increase substantially, especially if medical issues arise as you age.

3. You're assuming you can stay entertained on the cheap

Many people associate working with collecting a paycheck. But there's a hidden benefit to working: having something to do with your time.

Once you retire, you'll want to fill the hours you formerly spent plugging away at a job. And that could be a more expensive prospect than you expect.

There's plenty of free entertainment, like hiking or visiting museums that don't charge seniors an entrance fee. But you'll probably want (and need) variety once your career comes to an end. That could mean paying hundreds of dollars each month for things like cable, social outings with friends, and day trips.

Don't sell yourself short

It's easy to assume that you'll need a lot less income in retirement than when you're working. But don't make that assumption without sitting down to think about the expenses you'll face as a senior.

Once you do, You may decide that it's important to boost your nest egg or delay retirement by a few years to ensure that you have enough income to maintain a lifestyle you'll be happy with.