One Third Of Your Retirement Income Will Be Spent On This One Thing

In this episode, we dive even further into the BLS and other research on retirement income.

The Pension Rights Center says the average Social Security benefit per beneficiary is $1,360. While the average asset distribution was $1,542 per household.

They claim less than 30% of retired households have pensions and less than 7% have VA benefits. And the average earned income in retirement is $25,000.

The BLS provides this table:

Age of Household Median Income Mean Income
Households Aged 55-64 $62,802 $89,986
Households Aged 65-74: $47,432 $68,905
Households Aged 75 and Older: $30,635 $45,989

Notice the difference between median and mean. IT’s HUGE! We want to look at the median when we can as opposed to the mean, i.e., average

In the video, we’re going to dissect the income sources AND, as always, the tax consequence of having income from various sources.

Again, using the Tax Foundation handy-dandy calculator, you’ll see very quickly that depending on how where your income is from has a drastic affect on the tax you pay.

So, for those who do not want to watch the video, the crib note recommendation: Delay Taking Social Security Until You Are 70!………

It’s time to dispel a myth that plagues retirement planning: Health Care will NOT be your biggest expense.

Your largest expense in retirement, by far, is the cost of your housing. And it’s not even close.

In fact, looking at numbers from the Bureau of Labor Statistics, link is below), it’s not until you reach the age of 75 and beyond that health care costs become your 2nd largest expenditure. And even then it’s a far distant second than from what you will spend on housing.

And even then, food, transportation and “other” expenditures are all within striking distance of health care.

But housing remains above and beyond the most expensive item a retiree faces, accounting for 36.5% of a retiree over 75 expenditures. Health care comes in a distant second at 15.6.

I am not sure why the financial industry keeps harping on the rising costs of health care in retirement while paying absolutely no attention to the cost of housing.

Think about it like this. Fidelity says you need $280.000 to cover the cost of your health care in retirement. Well, the next logical question to ask is “If I need $280k for health care and housing is 3 times larger an expense, should I thus need $840k for housing???”

Yes, we’ve all seen, or heard stories, of retirees going broke due to health care costs. I’ve had clients had to shell out thousands a month for assisted living and then nursing home care.

Those are the exceptions though. Most people simple are not going to spend that kind of money on nursing home costs, be it because they couldn’t afford it, or they didn’t need it.

But EVERYONE needs a roof over their head. And EVERYONE will have to pay for it, somehow.

The number one piece of advice I can give to soon-to-be retirees is to pay for your future housing NOW, while you have an income from work. Pay off your mortgage…NOW!

Don’t rely on retirement savings to do that for you. That is a huge risk you want to avoid.

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