Retirement Expenses For Which You Forgot To Plan

Are you preparing for retirement but feeling confident that you have covered all the expenses? Well, think again... 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.

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Transcript Of Today's Show:

Speaker 1: Time for another edition of Plan With The Tax Man with Tony Mauro, from Tax Doctor Inc. I started to say Tony Mauro Tax Doctor, like that's your whole name or something, and myself to talk investing, finance, retirement, and retirement expenses, which we might forget to plan for. So we're just going to have a good conversation about some things to keep on the radar. Some of these seem like duh moments, but there's little ways we might think about this or forget about them, so that's going to be the topic of conversation. And Tony, how you doing, my friend? You doing all right?

 

Tony Mauro: I am well, yeah. Everything is going good.

 

Speaker 1: Well, good. So you do planning all the time. It's easy to forget stuff, right?

 

Tony Mauro: It is.

 

Speaker 1: I mean, you're a human being as well. You plan to take your own trips, you plan to go skiing or golfing or something, and you forget to take something. "Oh, man, I can't believe I forgot my glove," right? My golf glove or whatever it is. So it happens. But from a retirement standpoint, forgetting to do stuff can certainly wind up being a big pain in the you know what, especially depending on how it's affecting you. And it could be a little thing, it's not a big deal, but then there could be some big things. So on this episode, let's explore some of those expenses people tend to forget, and just kind of see if there's some tips or strategies we can talk through to see if that helps. Okay?

 

Tony Mauro: That sounds good.

 

Speaker 1: Medical expenses. Obviously, you can say, "Well, I'm not forgetting medical expenses, but how do I know they're going to show up? How do I plan for something that hasn't happened yet?" Well, that's true, and it is kind of hard to do, but that's when you've got to start thinking about where you're going to pull money from for these things. Because Tony, I think Fidelity's most recent number says like $315,000 out of pocket for people for ... that's not what the insurance is covering. That's out of pocket. That's hefty, man.

 

Tony Mauro: Yeah. And people were living a long time, and I think the biggest takeaway probably from this podcast on the tips area is as we talk about some of these things, is one, you need to develop a budget, and you need to work with your advisor on your own to get a budget, and budgets change, but at least you've got an idea, so you can start setting money site or plan to take it out of one of your pots. But the other thing too is you have to write stuff down too. As we age, I mean, if it's not on my calendar ... I don't try to commit everything to memory, so don't try to remember everything, write it down or get it in a plan of some kind, so it's a lot less burden on you. But yes, medical expenses, as we age, I mean, it's easy ... I mean, they go up. We could sit and talk about that all night long. There's other expenses too with medical. The little things, I think that's what pushes that out-of-pocket up so much. Everything from dental, to over-the-counter stuff, to stuff just for chronic ailments, things like that.

 

Speaker 1: Dental's is a good one, because that catches people off guard a lot.

 

Tony Mauro: It does. And a lot of that's not covered by insurance.

 

Speaker 1: Or Medicare.

 

Tony Mauro: It's best to track all ... yeah, or Medicare, for that matter. And it doesn't have to be sophisticated tracking. I mean, that's really good if you can go that far, but it's just something you've got to ... I think with medical, because it's so big, and it's going to be at the top of the list, especially as you age, it's one of the biggest things you spend money on.

 

Speaker 1: I think it's third. I think, if I'm not mistaken, Tony, I think housing is first for expenses, food second, medical's third.

 

Tony Mauro: Yeah. And so it's got to be tracked and kind of budgeted for. And then like you said, where are we going to take this money from these intended expenses? Obviously, if they don't occur, then you know, don't take the money out, but.

 

Speaker 1: Right, and then you got some extra money going on. But if you don't at least talk and discuss it, how are you going to have any kind of plan or options to dip into. You said budget earlier, Tony, and people go, "Oh, my God, I hate the B word." Well, fine, call it a spending plan, call it whatever the heck you want, but just some sort of cash flow analysis in and out, whatever the case is. And then that way you could maybe bump up some categories so that you don't have these unexpected expenses coming up like our next one. Unexpected travel, for example. Well, again, someone would go, "Well, how in the world am I supposed to know I'm going to need extra money for travel that it was unexpected," but you know you're going to want to do X number of travel, fine. You're planning for that, so why not ... and I'm asking you, but why not just going to bump that number up a little higher for things that might come up? What do you think there?

 

Tony Mauro: I think that's a great plan, and that's what we tell people to do. And we try to get them to put little kind of imaginary folders or the old envelope system, the Dave Ramsey stuff, even in retirement, not necessarily moving money there, but come up with our budget, and then bump it up a little bit.

 

Speaker 1: Pad the stats, so to speak, right?

 

Tony Mauro: Travel's one. Yeah, pad it, because besides your travel, you've got things like, I don't know, somebody asks you to go somewhere and you really weren't planning on it, but you've got the means, you're going to go do it. My father who now has grandkids getting married, and they don't live here, so he wants to go there, and make sure that he's there for that. You've got people spread out. You've got funerals, you've got maybe going out of state to see an elderly family member, all kinds of things that's not the funnest stuff you might want to do, and so it's not on the plan.

 

Speaker 1: That's a great point, because it could hit you off guard. You're thinking, "Okay, I'm kind of budgeting for the fact that mom's older, she lives in a different state. I'm going to go see her [inaudible 00:05:20], let's say, four times a year." But what happens if mom has to have a hip replacement that wasn't expected, which goes back to mom not planning for medical expenses. But let's just assume that something like that happens and you got to go stay with her for a month, and help take care of her, because she can't move, right? Well, that's unexpected travel, because you yourself are in retirement. Maybe mom's 85, and you're 60 or 65 or something like that. So I mean, it's easy to see where you can get some of these unexpected travel that takes longer. A, you weren't expecting it, and B, it's maybe a lengthier thing than you thought would even happen, period. And to your point about weddings, I mean, hey, it could be something as simple as you really want to pay for your granddaughter's wedding, and she decides she wants to have that in freaking Acapulco or something.

 

Tony Mauro: Well, right. Getting down there and dealing with all that.

 

Speaker 1:

Or paying for it, and everything else, because you promised. "Oh, Papi, you promised that you'd pay for it." Oh, man. So again, planning just, I guess, pad the stats. Add a little extra in there for things that could come up so that you're not caught short.

 

Tony Mauro: That's right. And I'll tell you my own father, and sometimes he listens to these podcasts, but I already tell him that I talk about it. And he's one of those retirees that he's not comfortable if he has less than $80,000 in his checking account, but that's what he uses as his kind of padding besides everything else. And he's fine. He has plenty of money to live on and whatnot, and we budget, but that's what he kind of uses for unexpected, but at least he has it. It's just in his checking. So I kid him about it a little bit, but I understand why he has it, because he doesn't have to fear some of these things we're talking about.

 

Speaker 1: Well, I've got a couple big ones I want to tackle, so let me keep moving along here. I want to go to taxes, because you're the Tax Doctor, but are we seriously prepared for a tax hike in the future? I think everybody ... I mean we all know it. You have to know it. You cannot be an ostrich and not realize that all the spending we're doing, it's not going to be going up. And even if they do nothing, which Congress is great at doing, it's going to go up in '26. So regardless of whether they make a move, it's going up.

 

Tony Mauro: It's going up. If they don't do anything, it's going up, because I got to think they'll allow it to go back. Of course, as we're taping this, if there's going to be a showdown again in June about the debt ceiling, and the reason we have all this debt is because just like a business, we as a government or a nation, I should say, they spend more than we take in. So even if it's not just a, "Hey, this is a tax." They come up with things. They usually try to hide them, because they don't like to talk about them, but we have to be prepared for that. While I hate taxes, I got to think somehow they're going to go up some way in the future

 

Speaker 1: And think about the numbers, Tony. So if you're ... a lot of retirees right now, maybe, find themselves in the 22% tax bracket, right?

 

Tony Mauro: Yeah. 20, 22.

 

Speaker 1: Yeah. So let's just say, and I think that the 22 is when it sunsets in 2019, or excuse me, 2026, the 22% tax bracket, I believe goes back to 25. Might be 28.

 

Tony Mauro: It's 25, and then it goes real quick to 28.

 

Speaker 1: Okay.

 

Tony Mauro: That's what it's supposed to be now.

 

Speaker 1: So it's a more narrow bracket. So going from 22 to 28, that might only sound like ... I mean, 6%. Hello, right? I mean, that's going to get pretty hefty. Think about the interest rates that we've ... [inaudible 00:08:42] the interest rates, but the inflation rates we've been dealing with, and so on, and so forth, so it's going to be a little more costly than we realize, and if they do nothing. And then just what if they go, "Well, we actually need more money, so let's go ahead and make that 30%."

 

Tony Mauro: Yeah, it is. And even on a hundred thousand dollars of income, I mean, that's still a lot of money, and that's a $6,000 tax increase. And on a fixed income, people are like, "Well, wow, that kind of really cuts into [inaudible 00:09:08]."

 

Speaker 1: And over time. So again, you got to have that ... you plan for it. And again, tax efficiency and planning right there. This one's one that you maybe shouldn't forget, because right now everybody and their brother is talking about tax efficiency, because of the tax rates we're in, and that Roth conversions, obviously, are a huge topic of conversation, because you can kind of manage your taxes now versus what we expect to happen, let's say, 10 or 12 years from now.

 

Tony Mauro: Yeah. It's a big, big topic. Taxes.

 

Speaker 1: Maintenance, and repair on the home. I mentioned earlier that the home is usually the number one expense for people, at least, early on in retirement, as they're either finishing off the mortgage or maybe making some changes so that they can retire-proof it, that kind of stuff. This one I always find interesting. You were talking about your dad a second ago, and having a big chunk of cash there. People say, "Well, I got an emergency fund for if the HVAC dies." Okay, well fine. If the HVAC or the roof gets a hole in it, unexpectedly, that's one thing. Maybe that's where you tap the emergency fund. And tell me if I'm wrong here, Tony, but if not. Let's say you're 60, and you're going to retire in the next five years, and you know your roof is already 30 years old, why are you not strategizing and planning to replace that roof sometime in retirement versus getting caught off guard?

 

Tony Mauro: I agree. Our pre-retirees, we go over the whole home ownership thing, and if they own the home outright, what kind of condition is it in? Is it important to them that they keep it up, and start strategizing for some of these things even before retirement. Even if we're not going to set money aside for it just yet, but knowing that it's on the list, that a roof, for example. My roof's 30 years old. It's kind of falling apart. It's not leaking, but I'm going to need one at some point. Let's get that down, and try to figure that out in the big scheme of things. I think another one too is ... and most retirees homes are aging, because most of them have lived there for a long time, and most of them drive older cars. I mean, I have a love-hate relationship with cars. I like them, but at the same time, we're always having to buy new ones or do something, and you may need a new car in your retirement days at some point, and the last thing you might want to do is have a payment. And so maybe you want to strategize, and maybe save for it or use some money to buy one that could be maybe the last vehicle you'll need. But these are the questions that you need to tackle under this whole housing slash maintenance repair thing, for sure.

 

Speaker 1: Yeah, definitely. Some really good points there for sure, Tony. Thank you for those. And then, finally, let's talk about everybody's friend.

 

Tony Mauro: That's their friend.

 

Speaker 1: Mr. Inflation or Miss Inflation, or whatever you want to call it. Either way, it sucks.

 

Tony Mauro: It's high. [inaudible 00:11:48] likes it.

 

Speaker 1: But let's view it at this standpoint, not the current, whatever we're going through inflation, just regular inflation. I said this all the time, and I'll continue to say it, because I think it works well. Inflation is normally thought of like calories. You don't pay attention to it until it's really bothering you.

 

Tony Mauro: Yeah, that's right. That's right.

 

Speaker 1: When you're feeling overly pudgy, you pay attention to your calories, right? And when inflation's high, you finally pay attention to it. But when it's normal, you just don't pay attention to it. However, if you don't, let's say, it cost you five grand a month, and that's what your number, you've identified five grand a month for living expenses going into retirement at 65. Okay? Well, 15 years later, that five grand's now 10 grand a month it costs you. So do you have COLAs, cost a living adjustments, built into your plan?

 

Tony Mauro: Yeah, because that will happen. It will be exceedingly higher than the 5,000 that you just talked about. And people always ask me too, "Well, do you think it's ever going to go down?" I say, "Well, inflation, it bounces around. Of course, we can see that right now, but how many times?" I always ask, "How many times have you gone somewhere, and they say, "Well, our price is lower than it was five years ago." Boy, it's great for you, great for me." I mean, nothing goes down. So even in normal times, things tend to inch up and we aren't paying attention. And good for businesses, because they got to keep up too. But I'm saying, as a retiree, you have to pay attention to that. Because if you're thinking 5,000 today, like you said, it'll be 10,000 or so in 10, 15 years from now, and that will be the new norm. But nevertheless, you may not have the ... if you're not building this in, the same income or the same lifestyle you thought you were going to have.

 

Speaker 1: Yeah, I mean, you've got to address it. And it's easy to sneak up on you. Inflation is the thief of tomorrow kind of thing, so it's going to steal some stuff away. So you've got a plan for it. And hopefully, your advisor has strategized like Tony does with his plan, for inflation, even normal inflation rates. And I think that's where people also panic too, Tony, when we're thinking about where our money's at. The market's not doing well. I'm nervous. Let me maybe consider taking it out. Well, that's going to be ... it should be, anyway, your later monies that you need to keep up with inflation. So make sure you're not panicking in just wholesale. When the market does bad, that's what we do. We panic and we go, "Let me go take money out, because I don't want to lose anymore." But it's like that's your now money I think you're thinking about when it's really, truly your later money.

 

Tony Mauro: Exactly. Yeah. I mean, it is. I mean, you hit it right on the head. I can't even expand on that.

 

Speaker 1: Well, thanks. It's almost like I talk to you guys all the time.

 

Tony Mauro: Yeah. I think the important thing is getting back to talk with your advisor, and making sure that you're strategizing for this, because it will sneak up on you and it will get you.

 

Speaker 1: It will bite you, that's for sure. So hopefully that's some things that you are remembering to do. You're strategizing for retirement and you haven't forgotten these. But if you have and you need some help or you just haven't reached out to someone for help at all, then Tony and his team, of course, are here, yourplanningpros.com. That's yourplanningpros.com. I don't think families get [inaudible 00:14:56] retirement. Tony's been doing this for 27 plus years, so he's a great resource for you to tap into. He's a CPA, a CFP, an EA, all the alphabet soup of good stuff there. So reach out to him, get onto his calendar, have a conversation, and plan with the tax man. Don't forget to subscribe to us on Apple, Google, Spotify, whatever platform you like using. Tony, thanks for hanging out with us. As always, my friend, I appreciate you.

 

Tony Mauro: All right, we'll see you next time.

 

Speaker 1: We'll catch you next time right here on the podcast. Again, hit that subscribe button or heart button or whatever it is to catch new episodes, as well as check out past episodes on Plan with the Tax Man with Tony Mauro, from Tax Doctor Inc.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.