What to Expect From Retirement ExpensesWhat to Expect From Retirement Expenses https://learningcentre.statefarm.ca/retirement-planning/what-to-expect-from-retirement-expenses/ bb3 May 22, 2013
By Staff Writer
According to the Financial Consumer Agency of Canada, you?ll need 60 to 80 per cent of your current annual income for retirement. But how can you tell how much to save if you don't know what your costs will be?
The fact is, many of your basic expenses will change once you retire. Some, such as housing and transportation, might decline. Others, for example medical expenses and travel, might increase. Here's a checklist of major expenses to consider in a retirement budget, with guidance on how to estimate future costs:
- Housing. If you expect to stay in your house and will have paid off your mortgage, you'll need to cover only taxes and insurance. If you plan to downsize to an apartment, research typical rent in your retirement location. Think a retirement home is in your future? The average monthly rent for a room in a seniors? housing facility is $1,966, according to Canada Mortgage and Housing Corporation.
- Utilities. These bills won't change much unless you move. Start with current costs and estimate future rates based on inflation.
- Transportation. Retirement eliminates commuting costs. If you currently have two cars, you may find you will need only one, cutting your insurance, gas and car payments.
- Health care. Statistics Canada estimates that a retired couple in Canada typically spends 15 per cent more per year on health care than a family with young children, so you may want to increase your budget accordingly.
- Food. Monthly food costs may decline once children are out of the house, but they'll increase if you're eating out more.
- Travel. Estimate how many trips you want to take per year. For example you might plan to travel four times a year at a cost of $1,000 to $1,500 per trip.
- Hobbies. Look into the costs of your dream activities. If golf is a passion and you want to play more, you might purchase a club membership.
- Inflation. Rising prices mean costs will be higher in the future than they are today. If you're 10 years from retirement, multiply your figures by 1.34 to see how 3 per cent annual inflation would increase your costs in your first retired year. If you're 20 years from retirement, multiply your budget by 1.813.
Learn more about what you might need to put aside for retirement with this planning calculator from State FarmŽ.
Neither State Farm nor its agents provide tax or legal advice. Please consult a tax or legal advisor for advice regarding your personal circumstances.