When you are saving for your retirement, it is well known that you need to calculate your retirement costs and save according to that. Though you calculate thoroughly and save for the requirement, there can be some costs you might have missed that are considered very important. When spoken about retirement costs, you might have added food, utilities, groceries to the list and missed out on some important expenses like,
1. Not taking inflation into consideration
Not including Inflation in your retirement calculations is the biggest mistake you’ll commit. The cost of commodities won’t be the same after 20-30 years. That is what inflation is, something that cost you AED 100 today would be AED 500 or more than that. It is not that the prices would increase but the value of the dirham would raise, increasing the cost of living. You must calculate the inflation and plan the finances accordingly.
Currently, you might be living with a monthly budget of AED 25,000 but after 10 years AED 25,000 would be equal to AED 18000 considering 3% inflation. Hence calculate the retirement budget with the inflation rate according to your retirement age.
Check: How possible is an Early Retirement?
2. Unexpected Healthcare Costs
Healthcare expenses are something people tend to avoid thinking there won’t be any health complications. But life is uncertain and you need to be prepared for any healthcare expense.
Even though you have health insurance, your insurance might not cover certain bills or if you retire early then in such cases any healthcare cost must be borne by you personally. Hence, you must be prepared for it financially when it will also give you mental stability at the time of need.
3. House Renovations
Post-retirement most individuals want to stay put in one place without keeping shifting to several places. If you are a house owner then you need to include the repair or renovation costs in the retirement plan. Now you might be comfortable with your house but in future, you might want the doorway widened, bathroom renovated, a new bedroom added, etc. So you can add an approximate price as you definitely can’t predict what renovation you would need.
Also, check: 5 things to avoid while planning Investments for Retirement
4. Travel & Entertainment
Retirement is the time where you will have all the time in the world to do something that you always liked. The more time you have, the more you want to indulge yourselves in some kind of entertainment or travel. All your early days would be spent hustling with professional and family responsibilities. You can make use of the free time and travel to the places you always wanted to. Or attend musicals or shows of your favourite artists. For that, you need to plan from a young age that is by adding a travel and entertainment budget as well to your retirement savings.
Check how much it would cost to visit a particular place of your choice at the current prices. Add inflation and some additional amount to get the expected cost for the travel.
5. Emergencies
There can be some emergency expenses you need to be prepared for financially backing your children, helping them with the down payment of a new house or gifting your grandchildren, etc. For these expenses, you can’t break your monthly budget on which you are surviving on but if you have an emergency fund you can make use of it.
Post-retirement life is meant to be lived peacefully mentally and financially. Even though you have planned for your retirement financially, not planning adequately and ending up with very little than you’ve expected at the time of need can be stressful. So plan wisely, include each and everything in your retirement plan budget, even a small thing would matter big. The simple reason you need strict planning is that post-retirement earning again is not an easy task to do.
About the author
Nikitha is a Senior Analyst at MyMoneySouq.com. She has been writing about personal finance, credit cards, mortgage, and other personal finance products in the UAE. Her work on Mortgage loans has been featured by the GulfNews and other popular Financial Blogs in the UAE.
