Skip to main content

5 costs to include in your retirement budget

By WTOP Staff

Most people accept that retirement won’t be cheap. But just how expensive will it be? Visions of the ideal retirement range from the extravagant pursuit of everything we have dreamed of to frugal plans calculated to stretch the buying power of our hard earned savings. Whatever course we set, we need to accurately estimate and budget for our future. While the final tab will vary depending on your lifestyle, some expenses are shared across the board and need to be budgeted for.

Health care costs. Health care costs will be one of the biggest expenses you must deal with in retirement. A 65-year-old couple retiring in 2013 will need $220,000 to cover health care costs during retirement, according to calculations by Fidelity. This figure is based upon average life expectancy data. If you are lucky enough to live longer, those costs can be even more. And these numbers do not account for long-term care expenses. The U.S. Department of Health and Human Services predicts that 70 percent of those age 65 and older will require some type of long-term care services. The cost of care varies depending on whether you receive it at home, in adult day care, at an assisted living facility or in a traditional nursing home. The average cost for a private nursing home is about $90,000 per year, assisted-living facilities average $3,477 per month and hourly home care rates average $46 for a Medicare-certified home health aide, according to MetLife. Failure to account for this significant expense means you may not be able to afford the care you need.

Basic living expenses. Some expenses go away in retirement. Most education loans and mortgages have been paid off, or at least significantly reduced. And retirees no longer need to set aside money to build a nest egg. But other expenses will stubbornly continue. It is reasonable to expect basics like gas, electric, water, TV, Internet and garbage bills to remain relatively unchanged with the exception of normal rate increases over time. Food bills should also remain relatively stable unless you decide to upgrade your lifestyle to gourmet status. You will need to include the cost of various insurance programs you subscribe to, potentially including health, home, automobile, liability and long-term care coverage. And even if you own your house outright, depending on where you live you may have to pay property taxes that can amount to 1 percent or more of your assessed value.

Recreational expenses. No one looks forward to a retired life spent doing nothing. Instead, we see ourselves engaging in activities and adventures we could not undertake while mired in the working world. Since this is our time to do what we want, we need to budget for recreational expenses to take advantage of our new freedom. Many retirees hope to travel more and spend longer periods of time at various destinations. My wife and I like to focus our travel on the destination rather than the accommodations. It is easy to spend a fortune on fancy lodging and big meals. But with a little effort you can spend time in faraway places without ruining your budget. A little frugality can allow you to visit more destinations while building quality memories along the way. Whatever your retirement recreation choices, it is important to have sufficient savings to fund your efforts.

Unforeseen expenses. Over the years we have had to deal with many unexpected bills. A family member needs to move home “for awhile” to get back on his feet, the transmission in the car goes out or an unexpected illness necessitates a hospital stay. A single emergency can have a significant impact on carefully laid retirement plans. You can add to your peace of mind by setting aside a monetary cushion for possible expenses that might suddenly materialize in retirement.

Miscellaneous expenses. Do you like to collect vintage automobiles, take luxury cruises or visit top rated restaurants. While these things may boost the quality of your retirement experience, they can also add to expenses. You don’t want retirement to be a time when you are forced to set aside the unique interests you have been waiting for so long to explore. If you can make the right preparations and set aside the necessary funds there is no reason you cannot feed your fancies as a retiree.

More from U.S. News

10 Ways to Reduce the Cost of Retirement

What Everyone Should Know About IRAs

10 Secrets of Successful Retirement Savers

5 Costs to Include in Your Retirement Budget originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote