5 Retirement Costs That Are Smaller Than People Think — and 1 That’s Much Bigger

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Running out of money in retirement is a nearly universal fear. If you share this worry, a recent survey has quite a bit of good news — and one sobering warning.

The Nationwide Retirement Institute polled 1,000 U.S. consumers ages 60 to 65 — including both retirees and pre-retirees.

As part of the survey:

  • Pre-retirees were asked how much of their retirement income they expect to spend on a handful of key expenses
  • Retirees were asked how much of their income they actually spend on those expenses

Based on answers from these two groups, here are the retirement costs that pre-retirees overestimate — and one they underestimate.

Saving for an inheritance for one’s family

Three generations
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 5%
  • Retirees actually spend on this: 4%

Some retirees want to leave a legacy for their loved ones. But pre-retirees believe financing such a dream will be slightly more of a financial burden than it actually turns out to be, at least judging by the experience of today’s retirees.

Investments

Senior man working on a laptop
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 5%
  • Retirees actually spend on this: 4%

Pre-retirees who intend to make big investments toward specific goals — such as buying a property or starting a business — during their golden years might overestimate the cost of doing so. Today’s retirees say they spend a little less on this than pre-retirees expect.

Supporting family members

Senior couple upset about money issues
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 5%
  • Retirees actually spend on this: 4%

It’s tough enough to cover your own expenses in retirement, let alone those of family members. Fortunately, today’s retirees say the amount of money they actually spend on supporting family is less than pre-retirees forecast it to be.

Long-term care expenses

Senior man in long-term care insurance facility
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 7%
  • Retirees actually spend on this: 2%

The fear of runaway long-term care expenses keeps many pre-retirees up at night. But today’s retirees say the reality is that they spend much less on these costs than pre-retirees fear.

Health care expenses

Senior man with his doctor
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 15%
  • Retirees actually spend on this: 12%

Health care expenses tend to increase significantly during retirement. But if the experience of today’s retirees is to be trusted, pre-retirees are fretting over these costs a bit more than they should.

The cost pre-retirees underestimate: basic living expenses

Senior shopping for groceries
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Portion of their retirement income that:

  • Pre-retirees expect to spend on this: 42%
  • Retirees actually spend on this: 53%

As it turns out, it’s not really the big expenses that end up straining retiree budgets. Instead, those in their golden years say everyday expenses — such as food and housing — are the costs that consume a large part of their income.

In fact, those expenses turn out to be much higher that pre-retirees forecast.

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