Retirement costs
I can retire. Can I afford to stay retired?
From: Retired, but the Bills Aren’t
Dear Gym Bear, my retirement plan covers today’s bills. But what happens when food, insurance, housing, and healthcare cost more ten or twenty years from now? I can stop working; apparently my cost of living has no such plans. How do I account for that?— Retired, but the Bills Aren’t
A little perspective from Gym Bear
Dear Retired, the bills are terrible at taking a hint. The key is purchasing power: what your income can buy, not just the number arriving in your account. For illustration, a $3,000 monthly basket rising by 3% each year would cost about $5,400 after twenty years. That’s an example of compounding, not an inflation forecast.
List which income sources adjust and which stay fixed. U.S. Social Security cost-of-living adjustments are tied to a price index, so they won’t necessarily match your household’s expenses. Check the actual terms of pensions and annuities rather than assuming they rise too. Give healthcare, housing, and occasional major repairs their own attention.
Keep your projections consistent: either use today’s dollars with returns after inflation, or future dollars with explicitly rising costs. Mixing the two can count inflation twice or overlook it. Test higher spending and weaker returns, distinguish essential from flexible expenses, and revisit the plan regularly. If the margin looks thin, a qualified retirement planner can help assess withdrawal choices. More investment risk is not a guaranteed cure for rising bills.
In your corner, Gym Bear
Mark each retirement income source “fixed” or “adjusts,” then check whether your projection uses today’s dollars or future dollars.