Five Biggest Expenses For Seniors To Watch In Next 12 Months
Medical costs are a big expense in retirement that many retirees tend to underestimate. But healthcare isn't always the biggest item. Housing takes the biggest chunk of the household budget in retirement. Here are five of the biggest housing expenses to whittle down in 2014:
- Maintenance and repair: This doesn't refer to occasional jobs like painting and replacing a roof, for which you may need to tap savings or a home equity line of credit. This category covers the far more common on-going repair headaches like leaky plumbing, failed furnaces, and drafty windows. Housekeeping and gardening services and equipment also come under this expense category. As seniors age, the need for services grows as health and living circumstances change. A common rule of thumb is to establish from 2% to 4% of the value of your home as your annual maintenance and repair budget. If 2% is too big of a stretch, forcing you to spend down your savings faster than you intended, you may want to think about downsizing your home as a new year's resolution, and look for newer, more modest housing in a less expensive area – or even renting.
- Homeowners and renter's insurance: With severe weather-related disasters, homeowner's insurance is one of the top ten fastest rising senior costs. If you haven't done so recently, review your coverage and determine whether it's based on the current value of your home and realistic current replacement costs. Many policies have new deductibles for wind and hurricane damage based on a percentage of your home's value, so take care and look before being tempted to increase deductibles to lower premium costs. Do shop around with other highly rated insurers to see if you can lower your premiums.
- Heating and cooling: According to TSCL's Annual Survey of senior costs, residential fuel oil has been the fastest rising expense for more than a decade. According to the U.S. Energy Information Administration, a 250-gallon delivery of home heating oil this season may cost more than $907. With the average monthly Social Security payment around $1,100, that's a cost few seniors can afford and still have something left over for groceries. Take time to survey suppliers in your area and compare costs. Do ask for a senior citizen discount and learn the supplier's payment options. Financing your heating fuel through the supplier may give you smaller, more manageable payments, but you will pay financing fees and interest. With interest so low on savings, it sometimes makes sense to pay in full when you can to save financing charges.
- Medical: Medicare recently reported the lowest growth in healthcare costs on record based on spending through 2010. But that's not the case for seniors. In fact, since 2000, Medicare Part B costs rose as fast as the cost of gasoline. Seniors will receive notification this month of their Medicare Part B premium for 2014. It's also important to check your Part D drug coverage. Medicare Part D's infamous drug coverage gap, aka the "doughnut hole," is slowly closing – a widely touted benefit of the 2010 healthcare law. Several Part D costs, like the "standard" deductible, and the out-of-pocket costs thresholds, will be lower in 2014. But for the first time since Part D started, the initial coverage amount, the amount all seniors use when they fill a prescription, will be less generous – by $120. That means you may hit the doughnut hole coverage gap sooner.
- Food: The cost of food has been rising faster in recent years and food prices have easily outpaced overall inflation for many other types of goods. Among other senior spending categories, only prices for oil-based products and medical care have risen faster than food prices. The U.S. Department of Agriculture (USDA) reports that meat prices, particularly beef and veal, are at record highs, and the USDA expects high prices for beef products through 2014. Poultry prices remain high but are falling. Try new recipes and plan menus. Use lower–cost cuts of meat and poultry and stretch your servings using less expensive sources of protein like beans, tofu, and high protein whole grains. Four chicken leg quarters that sell for under $1.49 per pound, for example, can yield 12 — one cup servings of home made chicken and whole grain rice soup, especially good made with white soup beans and fresh chopped mustard greens or endive. Freeze the extra and share with homebound friends.