Five Overlooked Factors When Planning for Retirement
Not only can taxes, inflation and health care costs catch you unprepared in retirement, but so can the costs of supporting others and paying for the fun stuff.

Forecasting expenses in the distant future, particularly over the span of several decades, poses a considerable challenge. As we funnel funds into our IRAs or 401(k)s, the prevailing sentiment often leans toward a hopeful outlook, with the belief that steadfast financial contributions will pave the way for a cushy retirement. However, there are certain underestimated variables in the calculation of retirement expenses. Being mindful of these five factors could assist in formulating a more accurate and pragmatic retirement budget.
1. Taxes
In addition to pursuing warmer climates, a significant number of retirees are drawn to specific states due to differences in the treatment of retirement income within those regions. Kiplinger shares a list of the 10 Most Tax-Friendly States for Retirees, and that list includes some more well-known retirement hubs, such as Florida and Alaska, alongside states such as Tennessee, Wyoming and Pennsylvania.
However, the prospect of relocating to another state may lack appeal for many retirees, despite the financial incentives. Whether due to proximity to family members or ingrained connections in social and religious communities, many retirees express a desire to stay put in their current states and homes. If this sentiment resonates with you and you reside in a state that taxes income and Social Security benefits, it may be prudent to increase your monthly contributions and save more.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2. Inflation
When calculating the monthly income needed in retirement, it’s important to consider the impact of inflation. For example, $100 worth of groceries in the year 2001 cost $143.56 in 2021, according to rateinflation.com.
Assuming an annual inflation rate of 3%, an individual who wishes to maintain their current lifestyle at $5,000 per month in 2023 should budget for about $11,783 in 2052.
3. Health care and long-term care
Fidelity suggests that an average retired couple age 65 in 2023 would need about $315,000 to cover health care costs during retirement.
Although it may be unpleasant to think about, there is also the possibility that you or your partner may need to live in a long-term care facility. According to a study by Genworth, a private room in a nursing home costs $315 per day, or $9,584 per month, in 2023.
4. Supporting others
As advancements in science and medicine persistently extend the average lifespan, an increasing number of adults find themselves navigating the challenges of the "sandwich generation." This term encompasses individuals who, amid the evolving landscape of longevity, are tending to the needs of elderly parents while also providing support for their adult children.
According to Pew Research Center, more than half of Americans in their 40s are in a sandwich situation, while 36% of those in their 50s, 27% of those in their 30s, 6% of those under 30 and 7% of those 60 and older are in this situation.
5. The fun stuff
Concluding our exploration of retirement expenses is perhaps the most captivating category often overlooked in budgeting — new (and cherished) hobbies! In retirement, the inclination to explore pursuits previously deferred or embrace entirely novel hobbies often takes center stage.
Travel, too, can incur significant costs, especially when relocating, which may require more frequent trips to connect with friends and family. Budgeting for extracurricular activities and travel will allow you to fully take advantage of the resource that was scarce during your working years — time.
For a detailed retirement planning worksheet, you can check out Equi’s free downloadable worksheet here.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Tory Reiss is a three-time founder of venture capital-backed financial technology startups. He’s currently the CEO of Equi, the elite destination for alternative investments. It is equal parts hedge fund and technology platform, with exclusive access to a variety of uncorrelated alternative investments.
-
Walmart+ vs. Amazon Prime: Which One Is the Better Deal?
Walmart+ and Amazon Prime both promise free shipping, exclusive deals, and a suite of add-on services. But which one should you get, if any?
By Rachael Green Published
-
This Underused IRA Option Offers Tax Benefits and Income Security
Looking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
By Jerry Golden, Investment Adviser Representative Published
-
This Underused IRA Option Offers Tax Benefits and Income Security
Looking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
By Jerry Golden, Investment Adviser Representative Published
-
These Four Books Explore How to Leverage Our Outrage Positively
The authors offer some powerful tools to help us find solutions to discord rather than remaining silent or blowing up in anger.
By H. Dennis Beaver, Esq. Published
-
Financial Pitfalls to Avoid in Your 30s, 40s and 50s
As you pass through each decade of working life and build wealth for retirement, watch out for the financial traps that can hinder your progress.
By Julia Pham, CFP®, AIF®, CDFA® Published
-
Five Key Retirement Challenges (and How to Face Them Head On)
Life will inevitably throw challenges at you as you get older. But making a flexible retirement plan — and monitoring it regularly — can help you overcome them.
By Walt West Published
-
Four Action Items for Federal Employees With $2M+ Saved
If you can't stand the chaos, maybe you can walk off into the sunset of retirement. Here are some thoughts on how to figure out if that would work for you.
By Evan T. Beach, CFP®, AWMA® Published
-
How to Help Accelerate Support for Women's Equality
It's International Women's Day, and the theme this year is Accelerate Action. Here's how we can all pitch in to help drive gender parity.
By Marguerita M. Cheng, CFP® & RICP® Published
-
How Tariffs Could Impact Affluent Retirees
The wealthier you are, the less price increases on groceries and cars will hurt you, but if markets dive or we enter a recession, that's a different story.
By Evan T. Beach, CFP®, AWMA® Published
-
How to Help Shield Your Retirement From Inflation
Picking the right investments at the right time can help ensure inflation won't flatten your retirement savings. Here are some tips.
By Steven C. Siegel, ASA, MAAA Published