7 Bills You Never Have To Pay When You Retire
One of the things that many workers don’t understand about retirement is that you’ll have to create a completely new budget. While you might feel as if life will continue in more or less the same fashion, the truth is that lifestyles and spending patterns change in retirement, sometimes dramatically.
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The good news is that many retirees learn that common expenses they’ve had in their working budget for years will actually disappear, freeing up more cash flow for other costs or even discretionary expenses. While not all retirement budgets are the same, here are some common bills that you may find you no longer have to pay once you retire.
Mortgage
By the time you retire, it’s possible you can kiss your mortgage goodbye. If you take out a 30-year mortgage at age 35 or earlier, for example, you’ll have it entirely paid off if you retire at age 65.
Even if you take out a mortgage after that age, there are two ways you may have it paid off by the time you retire. The first is simply by making additional principal payments along the way. Another way is to consider a shorter mortgage. With a 15-year mortgage, for example, even if you buy a house at age 50, it can be paid off by retirement.
Without a mortgage, you’ll likely free up thousands of dollars from your monthly retirement budget.
Second Car
Many workers have two cars, especially if they have families. But by the time you retire, you’ll likely be an empty nester.
While you may also want a car for your spouse, many retirees can get by quite easily on just a single car. If you’ve paid that car off, then you won’t have any car loan expense at all.
As most Americans pay car loans throughout their working lives, this can save you hundreds of dollars per month after you retire.
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(Higher) Taxes
Generally speaking, your tax burden will be higher during your working career than it will be after you retire.
Most retirees live off a combination of fixed income sources, such as Social Security and investment income. For many retirees, Social Security isn’t taxed at all, and no retiree pays taxes on more than 85% of their Social Security income.
Investment income can also receive special tax treatment, especially if it comes from qualified dividends or capital gains. You may also find yourself in a lower tax bracket after you retire, as your peak earning years are generally in your 50s, not after retirement.
Life Insurance
After you retire, you may find that you don’t need to pay for life insurance anymore.
Generally speaking, life insurance is used to cover major expenses like a mortgage or lost income on behalf of a non-working or lesser-earning spouse. But if you’re all alone in retirement, or if you’ve already paid off your major obligations like your home mortgage, you may not need life insurance anymore.
This is particularly true in the case of term insurance, which becomes prohibitively expensive as you get older.
Payroll Taxes
When you work a job, at least 7.65% of your income goes towards payroll taxes to pay for Social Security retirement and disability benefits. If you’re self-employed, you have to pay both the employer and employee portions, making your total obligation a whopping 15.3% of your income.
But if you are only earning Social Security and/or investment income in retirement, you won’t have to pay a dime in payroll taxes. This is another way you can trim a significant amount of money out of your monthly retirement budget, as you’ll get to keep much more of your income.
Dry Cleaning
It’s true that not all workers have to pay for dry cleaning, especially as work culture has become more casual over the past few decades. But many companies still require workers to dress up for work, and that can cost hundreds per month in dry cleaning bills. In most cases, retirees opt more for casual clothes, so it’s likely you can completely eliminate your dry-cleaning bills once you’re done working.
Commuting Costs
While travel expenses do increase for some retirees, if you don’t have a job anymore, you can stop worrying about commuting costs.
No matter how you got to work, you likely had to pay to get there. If you used your own car, gas, oil and maintenance likely added up to a few hundred dollars per month, depending on how far you had to go. You can say goodbye to those expenses forever once you retire.
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