Retirement can provide a blank slate for you to construct the lifestyle you want, but many people underestimate the costs associated with this stage of life.
Discover More: Cutting Expenses in Retirement: 9 Things To Downsize (That Aren’t Your Home)
Try This: One Smart Way To Grow Your Retirement Savings in 2024
While some costs can decrease, such as if you’ve finished paying off your mortgage by then, others can increase, such as if you want to travel more, entertain hobbies, try new foods, etc.
To help you figure out whether you’ll be able to retire on $1,500 or less, GOBankingRates reached out to experts for their insights. Here’s what they had to say.
Sponsored: Credit card debt keeping you up at night? Find out if you can reduce your debt with these 3 steps
Irregular Expenses
In the recent GOBankingRates retirement survey, 56% of Americans said they plan to live on $1,500 a month or less in retirement (aside from housing costs). Yet for many, this is an unrealistically low amount, especially when you consider irregular expenses.
“It feels like this amount would not provide enough cushion for the ‘what-ifs’ that could occur,” said Regina McCann Hess, certified divorce financial analyst, president and financial advisor at Forge Wealth Management.
For example, McCann Hess explained that while grocery costs can decrease with fewer people living in the house, healthcare expenses can be one of the largest retirement expenses.
“Many retirees get stuck in the ‘donut hole’ due to the medications while using Part D of Medicare,” she continued. “While you are in the donut hole, you are responsible to pay for up to 25% of your covered medications.”
According to McCann Hess, “In 2024, spending is capped at $8,000 for your covered drugs before you can leave the donut hole and move into the catastrophic phase. The good news is that in 2025, the out-of-pocket medication costs will be capped at $2,000. While this is a huge improvement, it is a good example of how medical costs can eat away at your budget.”
Long-term care costs can also eat away at your retirement budget and far exceed $1,500. For example, a home health aide costs over $6,000 per month on average, according to Genworth.
Check Out: How To Retire on $2,000 a Month: A Frugal Living Guide
Growing Your Nest Egg
Considering the risk of unexpected expenses blowing up your retirement budget, it can be helpful to plan for a larger nest egg. While this might seem like wishful thinking, there are manageable steps you can take pre-retirement to increase your retirement budget.
McCann Hess provided this example: “Every time you get a raise or bonus, increase your contribution percentage to your retirement plan. This is the easiest way to put more money away since it is not taking money out of your pocket that you are used to spending.”
You can also gain more retirement spending money by delaying Social Security benefits. Retirees can start receiving their benefits as soon as they turn 62 years old, but there can be long-term consequences to taking it as soon as you can.
McCann Hess warned, “Taking Social Security at age 62 can amount to a reduction of up to 30% of your benefit. This is a permanent reduction.”
Her advice? “To give yourself more spending money over your lifetime, you should minimally consider waiting until your full retirement age — 66-67 depending on your year of birth — to start your benefits,” suggested McCann Hess.
“Not to be greedy, but waiting until age 70 to collect Social Security could increase your benefit by up to 32%. This is important to consider since we are living longer and will need more money to fund our senior years,” she added.
Making the Most of Your Budget
While $1,500 might not be enough for non-housing retirement expenses for many people, it doesn’t mean it’s impossible to stick to this or other amounts, such as if you’re already retired and don’t have the ability to increase your budget.
But you need to carefully consider all your expenses and create a lifestyle that works for your budget. For some, that might mean finding low-cost yet fulfilling activities.
“There are many activities that you can do with little financial output,” said McCann Hess. “Many of my retired friends belong to Meetup groups that focus on group activities.”
These activities range from hiking in a local park and book clubs to trivia nights and mental wellness with peer-to-peer support groups.
“Participating in some of these activities can help in many ways. The most important of all, in my opinion, is to keep retirees active and social,” added McCann Hess. “Isolation tends to be a huge problem in the senior community. Participating in these types of groups can help decrease the impact of aging by yourself.”
Methodology: GOBankingRates surveyed 1,395 Americans aged 18 and older from across the country between Februrary 26 and February 28, 2024, asking twleve different questions: (1) Do you have a specific retirement savings goal?; (2) Will you need to work part time in retirement?; (3) In retirement, what type of housing/living situation would/do you you prefer?; (4) How important is/was proximity to family and friends in choosing a location to retire?; (5) Are you considering downsizing in retirement?; (6) Do you plan to or did you move for your retirement?; (7) Where is your ideal location for retirement?; (8) Which of the following will you consider/considered when deciding where to live in retirement? (Select all that apply); (9) What is the MOST important factor in deciding where you want to retire?; (10) What are you looking forward to in retirement?; (11) How much do you plan to spend monthly in retirement (outside of housing/rent)?; and (12) Which of the following countries would you be most interested in spending your retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
More From GOBankingRates
Downsizing for Retirement? Avoid These 6 Mistakes
5 Rare Coins That Sold for At Least $600,000
These 10 Aldi Brand Products Are Worth Every Penny
The Biggest Mistake People Make With Their Tax Refund -- And How to Avoid It
This article originally appeared on GOBankingRates.com: Many Americans Plan To Retire on $1,500 or Less — Is This Realistic?
