04/11/2014 05:38 pm ET Updated Jun 11, 2014

The Hidden Costs of Retirement

This article was written by Kate Furlong for

The thought of retirement can bring excitement and relief, but for many people, it can be unknown territory and can conjure up a tremendous amount of anxiety, stress and uncertainty, hindering their ability to properly prepare and actually look forward to the future.

When you're working in your 20s, 30s, 40s and 50s, you have an idea of what you need to pay for: after-school activities for your kids, daily lunch out, groceries, your work wardrobe, vacation -- you get the idea. It's easy to plan and budget for these things in the present, because you know how much you have coming in and how much is going out.

But when it comes to your post-work life, things can change, and it requires diligent planning to ensure you're in good shape financially during that time. "A good place to start is to take a thorough look at your expenses," said Crystal Kolcz, Vice President and Area Investment Manager for Fifth Third Securities. "Which of these expenses will go away or be reduced when you retire? Are there additional expenses that you envision that you don't currently have today?" Here are some other questions Kolcz suggests you ask yourself:
  • Will you live in the same house, or downsize?
  • Do you plan to travel more? Or work part-time?
  • What about long-term care or nursing care expenses? Do you have a plan for these as well? Often these expenses can have a significant impact on your retirement nest egg.

Here are some costs you should be thinking about as part of your retirement planning so that you don't find yourself ill prepared.


Housing is typically a cost that gets downsized in retirement, but that's not true for all people. Even if you do move to a smaller home or pay off your mortgage, you'll still be responsible for property taxes and/or homeowner fees (if you live in a condo or retirement community). Those could increase more quickly than you anticipate so you'll want to plan to have a cushion in your savings to cover them.

Increased leisure activities

Most people's retirement dream consists of spending more time with family and friends and doing things they never had the time to do when they were working, whether that be golfing, traveling, visiting grandchildren or meeting old friends over a meal or coffee. While this is no doubt a great time to be doing all of those things, these leisure pursuits also cost money and you might find yourself spending more on dining out and travel than you ever did while working. That said, be sure to factor in plenty of room in your budget so that you end up with both the time and the money to enjoy these activities.

Long-term care and medical expenses

Unfortunately, it can be very difficult to determine how much you might need to save for future medical expenses because it's impossible to predict longevity, health needs and government changes to medical programs. You may also want to purchase long-term care insurance, which can help cover expenses for home care or nursing services that are not covered by health insurance or Medicare and Medicaid. That said, not only is saving enough to cover these costs a good way to sleep more easily at night, it's also essential that you eat right and exercise in order to keep yourself as healthy as possible.


Take the time to sit down and go through your retirement accounts, perhaps with a financial planner or accountant whom you trust, and figure out exactly what accounts you have, approximately how much money you'll need each year, and what your expected tax strategy is going to be. Depending on how you access the money in your accounts, as well as how your financial situation varies each year (e.g., deductions, house sales, Required Minimum Distributions), your tax picture could look very different in retirement. Because you want to make sure that you're keeping your hard-earned money working for you as much as you can, meeting with a tax expert to keep your taxes to a minimum is well worth it.

Once you determine how your current expenses are going to change during your retirement years, you can start to understand how much you'll really need to save. Leverage online retirement calculators so that you can easily look at your goals and learn how much time it's going to take to meet them, says Linda Descano, President and CEO of Citi's Women & Co. She likes calculators from Choose to Save and AARP, but says that your bank likely offers one, too.

Plus, now that you know what you're saving for, plan ahead. Both Descano and Kolcz agree that if you're employer offers a 401(k) or other employer-based retirement place, it's essential to contribute at least the minimum of what the company will match.

Kate Furlong is a financial contributor to The Manilla Folder at, the leading, free and secure service that helps you simplify and organize your daily life. Using just one password, Manilla lets you manage your finances, utilities, daily deals, travel and rewards programs, Netflix and magazine subscriptions, and more -- all through or the top-rated iOS and mobile apps.

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