3. Tackle the Big 3 Retirement Budget Categories Separately from Everything Else
Housing, transportation and medical are the big 3 retirement budget categories. If you are anywhere near average, most of your money is spent on these categories.
According to the Bureau of Labor Statistics’ Consumer Expenditure Survey, for adults age 65 and older:
- Housing costs represent 33.9% of expenditures
- Transportation represents 16% of spending
- Health care represents 13.4%.
You should probably budget housing and transportation on a yearly basis — you may be able to predict how spending on these categories might ebb and flow.
It is more difficult to predict how and when medical costs will be incurred. Many experts recommending budgeting medical as a big fixed cost. According Fidelity Investments, a 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs in retirement.
Another study released by the Employee Benefit Research Institute reveals that a 65-year-old man would need $68,000 in savings, while a woman would need $89,000, if each wanted at least a 50% chance of having enough money saved to cover health care expenses in retirement.