10 costs to include in your retirement budget

Before you go, we thought you'd like these...
Before you go close icon
Are These Hidden Fees Taking a Bite Out of Your 401(K)?

Retirement bills

You won't have to pay commuting costs or buy expensive clothes for work in retirement. But you might face new costs as you use more health care services or take up new hobbies to fill your days. Remember to factor these expenses into your retirement budget.

Housing

Housing is likely to be your biggest cost in retirement, but there are also a variety of ways to significantly reduce your monthly housing bills. Paying off your mortgage can eliminate a major monthly expense, leaving only the cost of taxes, insurance and maintenance. Another option is to downsize to a home that costs significantly less and free up home equity to pad your nest egg. A smaller home in a less expensive neighborhood could also reduce your heating, cooling, maintenance and tax bills.

Also see the average retirement age in every state:

51 PHOTOS
Average retirement age in every state
See Gallery
Average retirement age in every state

Alabama - Age 62

Via Smart Asset

Photo: Getty

Alaska - Age 65

Via Smart Asset

Photo: Getty

Arizona - Age 63

Via Smart Asset

Photo: Getty

Arkansas - Age 62

Via Smart Asset

Photo: Getty

California - Age 64

Via Smart Asset

Photo: Getty

Colorado - Age 64

Via Smart Asset

Photo: Getty

Delaware - Age 62

Via Smart Asset

Photo: Getty

Connecticut - Age 64

Via Smart Asset

Photo: Getty

Florida - Age 63

Via Smart Asset

Photo: Getty

Georgia - Age 62

Via Smart Asset

Photo: Getty

Hawaii - Age 63

Via Smart Asset

Photo: Getty

Idaho - Age 63

Via Smart Asset

Photo: Getty

Illinois - Age 63

Via Smart Asset

Photo: Getty

Indiana - Age 63

Via Smart Asset

Photo: Getty

Iowa - Age 64

Via Smart Asset

Photo: Getty

Kansas - Age 65

Via Smart Asset

Photo: Getty

Kentucky - Age 62

Via Smart Asset

Photo: Getty

Louisiana - Age 63

Via Smart Asset

Photo: Getty

Maine - Age 64

Via Smart Asset

Photo: Getty

Maryland - Age 64

Via Smart Asset

Photo: Getty

Massachusetts - Age 64

Via Smart Asset

Photo: Getty

Michigan - Age 62

Via Smart Asset

Photo: Getty

Minnesota - Age 63

Via Smart Asset

Photo: Getty

Mississippi - Age 63

Via Smart Asset

Photo: Getty

Missouri - Age 63

Via Smart Asset

Photo: Getty

Montana - Age 63

Via Smart Asset

Photo: Getty

Nebraska - Age 65

Via Smart Asset

Photo: Getty

Nevada - Age 63

Via Smart Asset

Photo: Getty

New Hampshire - Age 65

Via Smart Asset

Photo: Getty

New Jersey - Age 65

Via Smart Asset

Photo: Getty

New Mexico - Age 63

Via Smart Asset

Photo: Getty

New York - Age 64

Via Smart Asset

Photo: Getty

North Carolina - Age 63

Via Smart Asset

Photo: Getty

North Dakota - Age 63

Via Smart Asset

Photo: Getty

Ohio - Age 63

Via Smart Asset

Photo: Getty

Oklahoma - Age 63

Via Smart Asset

Photo: Getty

Oregon - Age 63

Via Smart Asset

Photo: Getty

Pennsylvania - Age 63

Via Smart Asset

Photo: Getty

Rhode Island - Age 64

Via Smart Asset

Photo: Getty

South Carolina - Age 62

Via Smart Asset

Photo: Getty

South Dakota - Age 63

Via Smart Asset

Photo: Getty

Tennessee - Age 63

Via Smart Asset

Photo: Getty

Texas - Age 64

Via Smart Asset

Photo: Getty

Utah - Age 65

Via Smart Asset

Photo: Getty

Vermont - Age 65

Via Smart Asset

Photo: Getty

Virginia - Age 63

Via Smart Asset

Photo: Getty

Washington - Age 64

Via Smart Asset

Photo: Getty

West Virginia - Age 62

Via Smart Asset

Photo: Getty

Wisconsin - Age 63

Via Smart Asset

Photo: Getty

Wyoming - Age 65

Via Smart Asset

Photo: Getty

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Medicare premiums

Most people don't pay a premium for Medicare Part A hospital insurance, but Medicare Part B medical insurance charges a standard premium of $121.80 in 2016 – although a few specific groups of retirees pay more. Medicare Part D prescription drug plans charge a separate premium that varies depending on the plan you select each year. And there might be a third premium if you select a Medigap plan that will pay for some of Medicare's out-of-pocket costs.

Health care

Medicare Part B has a $166 deductible in 2016. After that, you will be expected to pay for 20 percent of the Medicare-approved amount for most of the medical services you use unless you purchase another insurance plan to supplement traditional Medicare. Some preventive care services are covered by Medicare with no out-of-pockets costs, but there are also several types of commonly needed medical services that typically aren't covered at all such as eyeglasses and hearing aids.

Taxes

After years of deferring taxes on your retirement savings, you will need to pay income tax on each withdrawal from your traditional 401(k)s and IRAs. Part of your Social Security benefit could also be taxable if your retirement income tops a specific threshold. However, there are several ways to strategically withdraw money from your retirement accounts and reduce your retirement tax bill.

Food

You can save money on food in retirement if you are willing to give up expensive convenience foods and take the time to cook healthy meals at home. However, the additional free time you have in retirement might tempt you to spend more on lingering lunches with friends. You may be able to qualify for senior discounts at some restaurants or even at the grocery store.

Emergencies

The need for an emergency fund doesn't end when you retire. You will continue to need to make home repairs, replace worn-out appliances and fix your car. An emergency fund is essential to avoid spending your retirement savings too quickly. You don't want to disrupt your retirement draw down strategy every time something breaks.

Entertainment

Your newfound free time in retirement provides opportunities to try new things, but those new experiences can get expensive. Fortunately, deals for seniors abound, such as discount admission to museums and movies, and some colleges offer low-cost classes for retirees. Many communities provide plenty of free or affordable entertainment to people of all ages, ranging from summer concerts to library seminars.

Travel

Retirees finally have time to travel as much as they want. The only limiting factor is your budget. Senior citizens and AARP members often enjoy discounts on hotels and rental cars. There are also creative ways to travel affordably if you're willing to stay with friends or swap homes with someone else. Retirees have the advantage of being able to travel during weekdays and off-peak times, which could save you money and help you avoid crowds.

Grandchildren

Nothing can throw off a retirement budget quite like the arrival of a grandchild. Grandchildren can change your financial priorities. Some grandparents like to lavish gifts on their grandchildren, travel to see them frequently, help provide child care or set up a trust to help provide for their future. Each of these scenarios can significantly change your retirement budget.

Leaving a legacy

Some retirees would like to leave financial gifts to their children, grandchildren or other heirs or pass on treasured items such as jewelry, furniture or other heirlooms. You might want to write a memoir or curate family photos. Make sure your wishes are clearly spelled out in writing so that your plans can be realized.

Copyright 2016 U.S. News & World Report

RELATED: The best states for retirement in 2016:

11 PHOTOS
Best states for retirement
See Gallery
Best states for retirement

1. South Dakota

Photo: Getty

2. Iowa

Photo: Getty

3. Minnesota

Photo: Getty

4. Alaska 

Photo: Getty

5. Oregon 

Photo: Getty

6. Colorado

Photo: Getty

7. Hawaii 

Photo: Getty

8. South Carolina

Photo: Getty

9. Nebraska

Photo: Getty

10. Wisconsin

Photo: Getty

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners