​Planning on spending less in retirement? You’re not alone. Many people factor in a decrease in spending after they stop working. Even many financial professionals often factor in less spending when they help you with your retirement planning. But this assumption isn’t always accurate, and if your spending is higher than you’d anticipated, it could have a big impact on your financial stability.
During retirement, there are a lot of things that can actually increase your spending. You can prepare yourself by identifying potential costs that may increase after you retire. Below are a few causes of increased spending during retirement. Knowing these ahead of time can go a long way toward helping you make the right plans for your post-work years.

Medical Expenses
The transition from employer-sponsored health insurance to Medicare can be difficult for many retirees. This is especially true if you had a particularly robust employer plan. While Medicare offers valuable benefits, it doesn’t cover everything. In fact, Fidelity estimates that the average retired couple will spend $260,000 in out-of-pocket health care costs, above and beyond what’s covered by Medicare.1

If you currently have a health savings account (HSA), you might consider making contributions to it before you retire. HSAs are a tax-advantaged resource that can help you cover the high cost of health care. You might also consider supplemental Medicare policies that augment your existing Medicare benefits.

You might be under the impression that once you retire, paying taxes will become a thing of the past. This, however, is not true. In fact, a large portion of your retirement income could be subject to taxes. Pension payments, retirement account distributions and even Social Security benefits are all potentially taxable.

It’s important to remember that the distributions you take from traditional IRA and 401(k) accounts are taxable. If you plan ahead for this, you’ll be able to account for the taxes you’ll see on your retirement accounts and include taxes in your budget.

Discretionary Spending
Many people find that once they retire, they have more time and money than they’ve ever had. That can be a dangerous combination. Some newly retired people find themselves filling their newfound free time with things like travel, dining out, expensive hobbies or expensive luxury items.

While there’s nothing wrong with treating yourself, it is possible to let it get out of control. It might be a good idea for you to put together a budget. Knowing where you’re spending money can go a long way toward reining in your expenditures and ensuring that your retirement funds will be there for the long haul.

Ready to develop your retirement spending plan? Let’s talk about it. Contact us at MasterPlan Retirement Consultants, Inc. to learn more. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.


Investment advisory services offered through MasterPlan Retirement Consultants, Inc. a Registered Investment Advisor in the state of Georgia. Insurance products & services offered through Fricks and Associates, Inc. MasterPlan Retirement Consultants, Inc. & Fricks and Associates, Inc are affiliated companies.

MasterPlan Retirement Consultants, Inc. & Fricks and Associates, Inc are not affiliated with or endorsed by the Social Security Administration or any government agency.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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