Tuesday, February 14, 2017

http://www.nextavenue.org/why-your-retirement-spending-estimate-is-wrong/

Richard Eisenberg
By Richard EisenbergMoney & Work Editor



When planning for retirement, people tend to focus on whether they will have saved enough. But it’s equally important to pencil out how much you expect to spend.
And that brings me to some disheartening news: After reading several recent studies plus Medicare forecasts, I’m convinced there’s a good chance you’ll need to count on spending more out-of-pocket for health care in retirement than you expect. Which means — sorry — there’s a good chance you need to save even more now.

Financial advisers often say that retirees should have enough income in retirement to replace about 80 percent of their pre-retirement income; that 80 percent is known as the Income Replacement Ratio or IRR. The money pros use that percentage because some costs tend to drop or disappear in retirement (things like work-related expenses).

Underestimating Health Costs in Retirement


But a new study from HealthView Services, which provides retirement health cost data and planning tools, says this guideline severely underestimates retiree health care costs — which amount to roughly 13 percent of annual spending for people 65 and older. Click here to continue reading.

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