Travel costs also add up, especially for retirees who base their plans on how often they used to get away while working. With more free time, there may be more desire to head to the airport and visit scattered family and friends.
The costs of family
Family matters also can drive up future costs, especially for grandparents who want to help out with a grandchild's college expenses. Many older people, years removed from worrying about tuition bills, may not appreciate fully how expensive education has become.
"It is not just college. We are seeing more and more parents choose private schools as well and looking for help from the grandparents," Johnson says.
Broader economic forces may be impossible to predict in detail, but they still need to be considered as part of a retirement strategy.
For example, inflation, current and projected, has a major impact on retirees living on a fixed income, Vernon says. A recent study by the Society of Actuaries found that, compared with other planning activities, only 72% of pre-retirees and 55% of retirees are calculating the effects of inflation on their retirement planning.
Only 5% of pre-retirees have a planning horizon to or beyond their life expectancy, and few individuals look 20 years or more into the future when making important financial decisions, the study says. Compounding inflation and savings concerns, 39% of pre-retirees and 36% of retirees withdraw money from their savings as needed with no set plan.
"Right now, people think inflation is down," Vernon says. "But look back 20 or 30 years -- did we have periods of high inflation? Well, yeah, and if you are going to be retired [for that long] you will have periods of high inflation and periods of a recession again. All you have to do is look back 30 years and count how many meltdowns we've had."
Even lacking a crystal ball, there are ways you can adjust your retirement strategy to make you better prepared for the curveballs that life and the marketplace throw at you.
Johnson says reducing debt, particularly a mortgage, is an important starting point.
"People in our industry sometimes say it is better to invest than pay down your mortgage, but we've seen the probability levels of enjoying a successful retirement go up really dramatically for those who have little debt compared to those who are paying down mortgages and have other forms of debt," he says.
Having some cash on the side for unexpected expenses "adds up across the board and allows people to have much better peace of mind," Johnson says. "We suggest that people have at least a year in cash for their living expenses and then, for those in retirement, having an additional one to three years liquid in instruments such as Treasurys or CDs. Even though they are not paying anything at this point, it is important that people have that on the side.
Vernon says many people project expenses only five years or so into the future, when they need to be thinking in terms of up to three decades.
"When they are working, a lot of people live paycheck to paycheck," he says. "As long as the monthly paychecks meet (your) mortgage and other bills, you are OK and you don't have to think out too far. But once that working paycheck goes away, then what? Then you need to start having a (longer) time horizon. It is just foreign thinking to a lot of people, but nevertheless that's what they need to do."
He suggests consulting with a financial adviser or at least using one of many retirement calculators available online to help get a grip on expenses and ultimate cash needs.
As a rule of thumb, he suggests looking back at your income and expenses over the years and then estimating how much income you will need annually above and beyond Social Security. Multiplying this number by 20, 25 or 33 offers some basic scenarios as to what your total nest egg needs to be -- the lowest number being generally applicable to those retiring later, the highest relating to those concerned about passing on assets to their heirs or to charity.
This article was reported by Joe Mont for TheStreet.
VIDEO ON MSN MONEY
Yes, the future is uncertain, especially with the idjits we keep electing deciding our futures. But life is great, and retirement is a lot of fun, and I really hope you all do it as soon as you can. Cut back on your expenses, it isn't hard to do. So you can't live as you did when you are working, so what? I don't waste money as I did before, that's all.
Get out of that job, let someone younger have it so they can build their nest egg and live their dream.
So let me get this straight. The average american couple is expected to pay off their own school loans, save for a downpayment on a home, make mortgage payments, save for their children's college education, save for their retirement, put money aside to help with the eldercare expenses their parents may need-- and now plan to help put their grandchildren through college? Huh? Who's pushing this line of malarky? Who has all this money? How about writing articles that average people with average jobs and lifestyles can relate to.
I was reading Barrons, about the "middle class" and the author described it as families with "Discretionary Income" after paying for housing and living expenses. In other words, having money left over. In the article, the author acknowledged the American Middle Class is decreasing and the emerging Middle Class is Communist China.
Amazing, how US Corporations have shut down manufacturing and via "China Inc, aka Wal-Mart" America is losing its' middle class. Laws passed and Not Passed in Congress with the help of $4 Billion in Annual Bribes of Congress, all 535 of them, is what has made the demise of the Middle Class.
400 American people have more wealth, about $23 Trillion, than 150 million Americans and taxed at 15%.
The Congressman Ryan "Road to Prosperity" wants to lower the marginal tax rate to 25% from 35%.
Ryan also wants to lower the Corporate tax to 25% from 35% so more Corporations like GE, had $14 Billion Profit but paid No Federal Taxes.
The "Road to Prosperity" to turn Medicare to a voucher, think "Privatization" like student loans, where today, students graduate with $100,000 in school debt verses "before Privatization" $10,000. Giving Seniors $6000 or $8000 an Annual Voucher for health care when a heart Stent costs $12,000 is nothing more than helping Seniors into the Poor house, eventually becoming Medicaid and loss of all assets and dignity.
Thanks for nothing Congressman Ryan, we know who you represent and it is not the 99% of the American People.
. Is there anyone out there in the Republican Controlled House that is for me, the 99% who are struggling?
For the average American familiy it is not possible to (1) save for reirement, (2) pay for the childrens college education, (3) provide the children cars as teenagers and pay for insurance, (4) cover weddings and (5) house down payments for their children and (6) live any reasonable type of life style, (7) Support their parents, (8)pay off the mortgage
So, prioritize 1, 8,6 and 7 : save 10-15% for retirement, live a reasonable life, go on some reasonably priced vacations and if you have some left over save for those other things. Despite what the propaganda tells you your kids can put them selves through college for the most part: There is the GI bill, scholarships, loans. They actually DON''t NEED A CAR in college: they can ride a boke and work locally: there are almost always parttime jobs near campus.
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