Five Monthly Expenses That Shape a Comfortable Retirement

A comfortable retirement is not determined only by the size of your savings. Your lifestyle has a major influence on what it really takes.

For some people, a $1 million nest egg may be sufficient. Others may want closer to $5 million. In practice, a comfortable retirement depends on whether you can consistently cover monthly bills with Social Security, portfolio withdrawals and other income streams. Looking closely at those expenses can help.

The unavoidable costs: housing and health care

The first step in planning for a comfortable retirement is to identify the biggest bills you cannot easily avoid. Even after a mortgage is paid off, homeownership still comes with expenses such as property taxes, homeowners insurance, utilities and any homeowners association fees. Repairs and ongoing maintenance also need to be included.

Listing all housing costs can help you estimate how much money you will need. It may also prompt you to consider changes such as downsizing, moving to a different area, or selling a home and renting instead. Reducing housing costs can make retirement easier to manage.

No matter where you live, health care is another major expense. Medicare provides some coverage, but premiums, prescriptions, dental care, vision care and other out-of-pocket costs still need to be paid. A Fidelity estimate suggests that a 65-year-old who retired last year could spend $172,500 on health care and medical expenses over retirement.

Daily expenses: food and transportation

The next two categories cover routine spending. Food-related costs include groceries, dining out and delivery. How often you cook versus eat out, along with where you live, can greatly affect what you spend on food.

Transportation is another necessary expense. It can include car payments, insurance, fuel, maintenance, rideshares, public transit and other travel costs. If both spouses are retired, one car may be enough instead of two.

Debt, taxes and insurance responsibilities

Debt, taxes and insurance obligations can consume a large share of a retirement budget. Including them in financial planning can help avoid surprises and support a more comfortable retirement.

Credit card balances, loans, mortgages and other debt compete with everyday living expenses. Paying them down as quickly as possible is usually best, even if that requires part-time work or major spending cuts. Social Security can help, but it is also important to remember that it may be taxable. Pension income and withdrawals from traditional retirement accounts can also be taxed.

Long-term care is another expense that is often overlooked, especially early in retirement. It can become a major cost later on. Long-term care insurance may help limit expenses if care is eventually needed, but monthly premiums will still take a bite out of the budget.