When people make retirement plans, they're often only thinking about the bare minimum when it comes to monthly expenses. Food? Check. Housing? Check. Transportation? Check. You've got everything covered, right? Retirees often make the mistake of underestimating how much they will spend after they leave the workforce. Extra purchases here and there can add up to a significant amount.
In an interview with Money-Rates.com, Elle Kaplan, founding partner and chief executive officer of LexION Capital Management, said that soon-to-be retirees need to take some time visualizing how they will live their post-workforce lives.
"Remember, you will have a lot more free time," Kaplan told the source. "You have all day to sit and watch QVC and the Home Shopping Network. You have more time to go out to dinner. You might spend more than you think."
Here are few retirement money drainers that you'll want to keep in check:
Family
Retirees are often used like ATMs by their families. While you may want to help your children or grandchildren with some of their expenses, don't offer more than you can afford. This is especially important when it comes to college expenses. Grandparents are often roped into paying all or part of someone's tuition because they have such a hard time saying no to their loved ones.
Medical costs
Listen up, folks. No matter what politicians say, Medicare will not cover all of your medical expenses – not even close. A lot of doctors won't even see Medicare patients because the government's reimbursement structure is a joke. And don't get us stared on prescription drugs. If you go to see a doctor, there will be out-of-pocket costs and you need to be ready to pay for them.
Another related issue that you need to think about is long-term care. If you have a major accident or get very ill, you may not be able to take care of yourself. Your kids may help out, but don't make that assumption. Your retirement account is going to need money allocated for possible assisted living or skilled nursing.
Housing
Even if you have already paid off your mortgage, your expenses don't end there. You'll still have to deal with property taxes and Homeowners Association fees. Maintenance is also a huge money drainer. If you've got a plumbing problem, or your heating and cooling system suddenly stops working, be ready to shell out hundreds, if not thousands, of dollars to get these issues fixed. A good savings rule of thumb is to have 1 to 4 percent of your home's value put aside for repairs.
Good retirement planning will put you in a situation that will keep you comfortable and free from worrying about hidden expenses.