The Five Biggest Expenses in Retirement

When planning for retirement, it’s common to anticipate increased spending in areas like travel and entertainment. However, at Willamette Wealth Partners, we’ve observed that retirement spending predominantly falls into five major categories, with travel being just one of them.

1. Healthcare Costs

Healthcare is a significant expense for retirees, especially those retiring before According to the Wall Street Journal, “leaving work four years before starting Medicare can drain $100,000 or more from retirement savings.” Even post-65, Medicare does not fully alleviate the financial burden. On average, Medicare only covers about 80% of approved expenses, after the deductible has been met. Preparing for these expenses is crucial, as out-of-pocket costs for Medicare Part B and D premiums, along with dental, vision, and long-term care (which are NOT covered), can significantly impact savings.

Strategies for Managing Healthcare Costs:

  • Before retirement, opt for a high-deductible health plan and maximize contributions to a Health Savings Account (HSA), which gives savers a tax deduction upon contributing to the account, defers taxes on any earnings in the account, and allows for tax-free withdrawals to cover medical
  • In retirement, review your Medicare coverage and any gaps that may be filled with the right plans.

2. Taxes

Contrary to common belief, taxes can remain a considerable expense in Large pre-tax retirement accounts like 401(k)s and IRAs can lead to high tax liabilities. Proactive tax planning, including diversification* between pre-tax and Roth contributions, can mitigate future tax burdens.

Strategies for Tax Planning:

  • Balance contributions between pre-tax and Roth
  • Utilize Roth conversions to lower lifetime tax
  • Employ strategic withdrawal planning to minimize tax

3. Travel

Travel often features prominently in retirement plans. Costs can vary widely, so planning and saving for travel expenses are essential.

Planning for Travel Expenses:

  • Outline desired travel destinations and estimate costs in today’s
  • Calculate yearly travel budgets, accounting for inflation, to determine necessary savings.

4. Home Maintenance

Home maintenance can become a major expense, especially as deferred maintenance comes due in Planning for both regular upkeep and potential renovations is vital to avoid financial strain.

5. Supporting Children and Grandchildren

For many, retirement spending includes financial support for children or grandchildren, whether for education, gifts, or shared

Planning for Family Support:

  • Assess the financial impact of supporting family members to ensure it doesn’t compromise retirement security.

At Willamette Wealth Partners, we employ advanced planning tools to help clients prepare for these expenses, ensuring a financially secure and fulfilling retirement. If you think you might have questions about these retirement expenses for yourself and your own family. We’d love to meet.

Contact us today to explore how we can support you in achieving a retirement filled with joy, security, and fulfillment. Together, let’s turn your retirement dreams into reality.

 

By Adam Coughlin written in collaboration with Lexicon Advisor Marketing

 

Disclaimer:
*There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified Diversification does not protect against market risk.
*The Roth IRA offers tax deferral on any earnings in the Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Heather Dopp

Operations Manager

Heather grew up in Sun Valley Idaho and moved to Eugene in 2001. She has a bachelor’s degree in business administration from the Lundquist College of Business at the University of Oregon. Before joining the Willamette Wealth Partners team, Heather worked as an office manager. In her past role, her biggest accomplishment was assisting her company in becoming the second business in Lane County to achieve Voluntary Protection Program status from Oregon OSHA.

Heather and her husband Josh have a daughter named Leila. Heather’s biggest passion is spending time with her family and traveling to new places. She loves rafting, fishing and exploring Oregon rivers with her friends and family during the summer months. Heather also enjoys cooking and trying all kinds of cuisines from around the world.

Adam R Coughlin

Certified Financial Planner™

Adam began his career in financial planning in 2019 in Rochester, Illinois, working for an investment advisor and retirement education company before moving to Oregon to work at Willamette Wealth Partners. Prior to his career change, Adam worked in information technology and insurance.

Adam graduated from Illinois State University with a B.S. in Finance as well as a minor in Financial Planning and was chosen by faculty as ISU’s Outstanding Senior in Finance and Outstanding Financial Planning Student for his graduating class. In 2021, he placed Top 5 in the Financial Planning Association’s Case Study Competition. He is a CERTIFIED FINANCIAL PLANNER™.

Outside of work, Adam enjoys fishing, going to the gym, playing with his two Siberian Forest Cats, and exploring new restaurants with his amazing wife Kelsey.

Locke Bielefeldt

Certified Financial Planner™

Locke grew up in the Willamette Valley, where he watched his father, Doug, build a thriving financial planning business. After witnessing the impact, a financial planner can have on client’s lives, Locke became inspired to seek a BBA in finance at The University of Portland.

Before returning to his hometown of Eugene, Locke worked in leadership and consultant roles focused on small business and startup finance. He now assists clients in pursuing their financial goals through independent and collaborative advice, customized investment strategies, and financial planning.

Outside of work, Locke enjoys traveling, cooking all kinds of foods, reading science fiction, and spending time with his wife, Amelia.

Locke has been listed in Forbes’ “Top Next-Gen Wealth Advisors Best-in-State” for 2023 as well as Forbes’ “Best in State Wealth Advisors” for 2024.

The Forbes Best-in-State Wealth advisor ranking, developed by SHOOK Research, is based on in person and telephone due diligence meetings and a ranking algorithm that includes: client retention, industry experience, review of compliance records, firm nominations; and quantitative criteria, including: assets under management and revenue generated for their firms. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK Research receives a fee in exchange for rankings.