Are you preparing for retirement, but not feeling confident that you have covered all the expenses? It turns out that many retirees overlook some crucial expenses that can leave them financially vulnerable.
In this episode, we explore the retirement expenses that most people tend to forget, including skyrocketing medical bills, unexpected travel costs, taxes, and much more. We'll discuss practical tips and strategies to help you plan for these expenses and ensure a secure and comfortable retirement.
Here are some of the topics we’ll discuss in this show:
- Would Ryan choose a personal chef or personal maid? (1:13)
- Medical expenses will likely be the most costly expense and Medicare doesn’t cover it all. (2:47)
- Examples of unexpected travel expenses that pop up. (4:53)
- There’s a good chance you might have to provide financial support for parents and children. (7:30)
- Is your plan accounting for inflation? (12:22)
- Hear some financial questions we’ve gotten recently. (14:14)
Ryan: I've seen studies that have shown that the cost of medical expenses in retirement, it goes up at about twice the rate of the overall inflation rate.
Announcer: When it comes to financial planning. You need to cut through the jargon so that you can understand how to achieve your own retirement success. This is Candid Conversations Retirement Talk with Ryan Cravitz of Cravitz Financial & Insurance Solutions.
Ben: Well, hello and welcome into Candid Conversations Retirement Talk with Ryan Cravitz over at Cravitz Financial in Irvine, California. We're talking about retirement expenses today and some spots where people overlook. And of course you don't want to do that because you want to make sure your retirement is protected for the long term. So today we'll kind of help you be aware of these expenses and talk about what you can do to make sure you plan for them and why you need to account for them in your retirement plan. Ryan, welcome. Come in. How are you?
Ryan: I'm good. How are you doing?
Ben: I'm doing well. I thought we'd changed up a little bit to kickoff the show and do a little getting to know you question kind of more of a personal question to find out more about you away from work. We always talk financial planning, but it's a fun one today and I'm really curious what you say here because I got my own opinion on this one. Would you rather have a personal maid or personal chef?
Ryan: Can I pick both?
Ben: Nope, you got to pick one or the other.
Ryan: Oh man, that'd be nice to have both of those right there. Let's see, if I had to pick just one, I guess I would have to pick the personal chef because my wife could very much attest to the fact that I cannot cook, so she says I would starve otherwise so much I'll have to find some other way to get food. The maid part's pretty attractive though with kids and trying to keep everything straight all the time. It can be a job itself a lot of times.
Ben: You're not kidding. I mean the maid part, I can do, I don't enjoy it, but at least I know how to use a vacuum. But it would nice to have those, I guess with the chef too, you could kind of request whatever you wanted and it doesn't matter what ingredients are there, you can just whatever you're feeling they can take care of. So I get that answer.
Ben: All right, very good. I like that. Again, we're going to get into our conversation today on a retirement expenses. If you have questions, again as we go through this and something stands out to you or maybe you're concerned about an expense that you haven't accounted for today and your retirement plan, just log on CravitzFinancial.com or call 714-462-9155. Also get your retirement ready check up too, it's a great time to do that and see where you stand and begin that conversation with Ryan.
All right, so again, talking today, Ryan, about these expenses that as you're getting close to retirement, you want to make sure you've kind of got everything covered. And there are oftentimes where people get into retirement and realize, oh man, overlooked some pretty crucial expenses. And now I'm a little bit worried about where my financial long-term outlook might be. So let's talk about a few of these and just discuss some strategies and how you help plan these expenses into a plan for people. So medical expenses the first one out on my list, and yeah, I know you can attest to this. Medical expenses, even though everything else is going up around us everywhere, medical expenses still seem to outpace everything else right now and to the point where you know, don't know oftentimes what it's going to actually cost you. So it can be a real tough to plan for that.
Ryan: Absolutely. I mean, medical expenses is costly. I've seen studies that have shown that the costs of medical expenses in retirement, it goes up at about twice the rate of the overall inflation rate.
Ryan: And a lot of people are shocked by this in retirement and unfortunately haven't planned and making sure that they have the money is set aside to be able to handle this. Estimates are saying that the average person retiring now will spend about $200,000 to $250,000 just on medical expenses alone during retirement. And one of the things that a lot of people are shocked by is they think that dental expenses are covered by Medicare. Now, some people have an Advantage plan and it may be covered to some degree, but then a lot of times people are surprised to find out that it may only cover the basics. It won't cover maybe some more extensive work that you may need to get done, which is the thing that really ends up costing a lot more money. So it's definitely something you have to be aware of.
Ben: So it's kind of twofold, right, where you don't know how much it's going to cost you, but then also you got to account for those expenses that might not be covered that you're not aware of. So it could add up pretty quick, but that is pretty remarkable. $200,000 to $250,000 is what the average person will spend on medical expenses. Unexpected travel, this one you might hear travel and say, "Oh look, I know what I want to do. I want to travel here, I want to visit this, I want to see this place." But we're talking more about these travel expenses that you don't really think about because they're not planned for you. And there's some pretty good examples of how this can come into play, right?
Ryan: Absolutely. I remember a client of mine telling me that she was always thinking that when her granddaughter got married, she was going to get married somewhere local anyways, or she wouldn't have to travel too far, but it turns out the granddaughter wanted to end up getting married in Mexico. So this big destination wedding, so now you're talking plane tickets, you're talking hotels, you're talking all the rest of it, and now this is a lot more money. And in my client's mind, there was no way she was going to miss the wedding. I mean, it's certainly going to cost a lot more than she ever expected to have to pay, but this is an expense that she had to pay. I mean, she would not miss this.
And the other thing that I see come up from time to time, or it's not something we really want to think about, but it is something that definitely happens and that is funerals, you may have a long distance friend, close friend, or family member that passes away and next thing you know, I mean, you don't want to miss the funeral. So you're flying maybe across the country, and again, you have plane tickets, you have hotels and all the rest of it.
I also remember one client of mine, she lived in California. I'm trying to remember where her mom lived, I can't remember off the top of my head, but it was somewhere pretty much all the way across the other side of the country. And her mom was getting ill and really needed some more help, and she really didn't have any other family that was in that area. And I guess she had some close friends, but really needed some more assistance. And my client, there was just nothing she could do. I mean, obviously she could make the decision, but in her mind she had to be over there as much as she could and she was flying out there like six times a year and spending a good amount of time each time just out there with her. So again, that's a lot of travel costs and everything else. So these are things that a lot of times people just don't plan for, but for many people, these are expenses that do arise.
Ben: I know that travel can be costly too, and it creeps up, so you want to have that accounted for in your plan. All right, here's another one that we think a lot with retirement about planning for ourselves and our family and just keeping an eye on what we need to do. But we often overlook the fact that, hey, there's a good chance that you might have to provide some care for either your parents or even your children. And we're in this kind of time where there's a sandwich generation, Ryan, where there it's pretty common for people to have to be supporting both their parents and children financially.
Ryan: It is, and use that word sandwich, that's exactly what I was thinking. I mean, I've seen many situations, and maybe it's a situation for you or for somebody where maybe your kids still need some help financially, but then also maybe your parents are having some financial issues of their own or maybe they're going through different health issues or whatever it is. And next thing you're sending money to your kids, you're helping to pay for expenses for your parents, and that could really put a strain on your personal finances. So it's a tough thing being it being in that sandwich generation, if you will.
Ben: And it seems like there are more and more kids getting out of college that kind of return home and kind of lean on and rely on their parents early on in their career to help keep them afloat financially.
Ryan: There's quite a few. Yeah.
Ben: Yeah. All right. Taxes is next up. So taxes, we know taxes are going to have to be paid in retirement. We are very well of that. So what is the hidden expense here? Well, it's the fact that we just don't know what the future might hold. And from all signs and from most experts you listen to seems to be a common agreement that, hey, they're probably going to be going up in the future.
Ryan: Yeah, actually they're definitely going to be going up unless something changes because the Tax Cuts and Jobs Acts in the sunset here in 2025. So we're going to go back to the old tax rates that were higher and we have other things to consider. The national debt is like $31 trillion now. It's as big as it ever it has been. And so there's different proposals. I've been reading recently about ways where they may want to shore up the social security system and Medicare system, which of course the only way to do that is to either reduce expenses or increase taxes. So there's a lot of things that could come up there. The other thing that I see here big time with a lot of people is that they will have a good retirement plan built for themselves overall. Let's say you've got a couple, and I'm thinking of somebody in particular right now, but you've got a couple husband and wife and let's say in their sixties and they're going to retire and based on their plan, they're going to be in great shape, I mean they could live well until their nineties and they're going to be just fine financially.
However, a lot of them think about what if one of them passes away early and what's the impact then on their plan? Because now they're down to only one social security check. And the other thing is tax wise, they now have to file that surviving spouse has to file as a single person, so they're down to one standard deduction. Also, the tax charges aren't as favorable. So that's another very real reason why taxes could end up up in the future.
Ben: All right, so that's something we need to factor in. What about maintenance and repair? This is one that it's unknown because we don't know when our roof might need to be repaired or the HVAC might go out or your car might need a major repair as well. But there's a good chance these things are going to pop up and it seems like when they do, they all happen at once for most people. So how do you plan an account for these things?
Ryan: You really have to plan for it just by making sure that you're planning for those expenses. So I know that sounds a little bit odd, but here's what I mean. For instance, I had one person I was talking to who said, well, their car is paid off, so they're not worried about car expenses. And I said, "Well, how old is the car?" And the car was several years old, and so we had to have that discussion. How many miles are on it? How long do you actually think you're going to keep the car? And by the time you sell the car how much you think you would probably get for it? It probably wouldn't have been very much as long as they were going to own it for. I said, "But then at that time, you're going to need a new car." So we had to factor in that there's going to be a cost there for that car at that time.
So just kind of thinking through those expenses are going to arise in the future. And especially as it comes to housing expenses, you may have some years where you don't spend very much and you can't just account and assume that that's what you're going to spend each year throughout your retirement. You have to factor in more of an average overall cost of what you would expect to spend on that house over the course of let's say, 20 or 30 years. And then just break that down is an average year by year. It's really the best way to do it to make sure that you're prepared.
Ben: I got one more on our list for you here, Ryan, as we talk about retirement expenses that some people will forget to plan for and it's inflation. And right now, maybe this one doesn't need to be on the list right now because it, everyone's thinking about inflation and how we need to account for that. And if you just got into retirement in the last couple years, then it really might have hit you pretty hard. But even on a regular year to year, when inflation's a little bit lower, you might not notice it, but it's always going to impact you over time, right?
Ryan: Absolutely. And you hit the nail on the head, really in 2022 inflation was like the hot topic. I mean, it was on everyone's mind. You've seen much higher prices just by going to the grocery store or wherever else. But before that, for several years before that, inflation really wasn't a big topic because inflation just wasn't as high. But the fact is it was always there. It always is there, and as I call it is it's like the silent killer because over time it is going to erode your purchasing power. So you have to make sure that your overall in investment plan and retirement plan does account for the fact that even if we only experience 3% inflation, what that means just simply using the rule of 72 is that in 24 years, you're going to need twice as much money to live on to have the same type of lifestyle. So you have to account for inflation.
Ben: So these are retirement expenses. This is not the complete list. Probably these are some of the more common things that people overlook. So you need to have a plan for these. If you haven't discussed any of these items with your financial advisor, please put that on your list now. And if you just haven't done any planning yet, then now is a great time to sit down with someone. And Ryan is always available for our conversation at 714-462-9155. Again, 714-462-9155. I want to kind of close out the conversation, Ryan, we like to do this. Just bring it in some questions to the podcast that you've dealt with recently and just bring them here and talk through them. I think it'll be very helpful. I want to start with one here that I think is really good. "So I just paid my last tuition payment, so my kids are officially off the payroll. Is it safety to cancel my life insurance at this point?"
Ryan: Well, good question. So it depends. The question that I always say that you should ask yourself is if, God forbid, if you were to pass away tonight, I know it's not something we want to think about, but if that were to happen, would anybody that you really care about suffer financially? And if they wouldn't, then I would say you probably don't need to have that life insurance anymore. But if they would, then I would consider keeping that policy. There's many couples that are in retirement that have life insurance, and they make each other the beneficiaries because if one spouse passes away, you lose that social security check, or maybe it was a pension that stops and you want to make sure that there's life insurance to kind of replace that. So there can be different reasons. So I don't know your situation, obviously, but those are some of the things that you want to think through.
Ben: Awesome. Very good on us, a situation some people find themselves in. So a good question to bring up here. Here's another one about the market. "Is the market going to crash further." Or farther? I'm not really sure how that one goes, but, "I worry about it constantly." So what do you tell somebody there?
Ryan: Well, I can tell you that further or farther, I never know which one to say there either. And I, is the market going to crash further? Well, to answer that, all I need to do is just pull out my crystal ball right here.
Ben: There you go.
Ryan: And I will be able to tell you that exactly, and I know I'm being a little coy, but the reality is this, that nobody knows from day-to-day what's going to happen in the market. We can't predict the future that way. The best that we can do, and this is really important, is to plan properly so that we know that okay, the market is going to have its ups, it's going to have its downs, and historically we've had a bear market about every four or five years or so, and which means that going from a high point to a low point, the market goes down 20% or more. It happens. I mean, these are the market cycles, but as long as we have a good intact retirement plan, investment plan, everything working together, and we know that we're going to have these ups and downs along the way, if it's built to withstand that, then that's when you're going to be okay. But don't worry about the day to day.
Ben: Awesome. Very good. All right, let's close out on that note, do this show to show. We'll bring some questions here, some common questions that get asked to Ryan and present them here and go through his process of answering those. But again, if you have questions directly that you want to send his way and the team at Cravitz Financial, you can log on CravitzFinancial.com or call 714-462-9155, confidence, security, peace of mind, that's Cravitz Financial, and he's happy to help you with whatever you have, financial or retirement planning wise. So Ryan, good show as always, look forward to catching back up with you again. But I think today's conversation on expenses is one that hopefully get people thinking about some things I need to pay attention to and hopefully address with their financial professional.
Ryan: You got it. Absolutely.
Ben: Well, thank you for listening to this episode of Candid Conversations, Retirement Talk with Ryan Cravitz of Cravitz Financial in Irvine, California. I am Ben George. Take care.
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