George Kamel - What People Get Wrong About Retirement (Don’t Miss This)

Episode Date: March 20, 2024

💵 Sign up for EveryDollar today - Create a free Budget!  According to a survey, there’s a major expense that’s eating up more than half of people’s retirement income. And no, it’s not hard candy. In today’s video, I’ll reveal this costly spending category and what you can do to be prepared for it.   Next Steps 📗 Order George Kamel’s new book, Breaking Free From Broke. Watch: How Much You Should Have In Your 401(k) By Age   Offers From Today's Sponsors 📞 BetterHelp: This episode is sponsored by BetterHelp. Get 10% off your first month of therapy! https://www.betterhelp.com/george   🎙️ The Ramsey Show   🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💼 The Ken Coleman Show 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Nobody wants to run out of money, especially at Bath & Body Works. But there's another time it would be even worse to discover your pockets are empty. And that is in retirement. Now, thankfully, it's something we can prepare for. But how do you know what you'll need to spend money on in your golden years? Well, thanks to a recent survey from Nationwide, we've got some brand new data about what retirees are spending in their retirement. Thanks, Nationwide.

Nationwide is on your side. Move over, Paisley. Peyton and I have it from here. Anyway, they surveyed 1,000 people ages 60 to 65. Some were retired and some weren't. They asked those who had not retired yet how much of their retirement income they expect to spend on several key expenses.

And here's the cool part. They also asked the retirees how much of their income they actually spend on those same things. So what we get is a picture of what people expect to spend in retirement and what they actually end up spending. And it turns out, people don't need as much as they think

for a few of those expenses, which is great. More money for hard candy, right? But there was one expense that's costing retirees way more than they expected, and it's eating up half of their retirement income. What expense is that, you might ask? Well, I'll tell you in today's video. But before we jump in, do me a favor, hit those like and subscribe buttons, and share this video with at least two youths.

Youths! Okay, let's get to the first retirement cost people overestimate. People who were not yet retired thought they would spend 5% of their income on this, Retirees reported, they actually only spent 4%. And it's this, saving an inheritance for their family. So it's costing them less than they thought, which is good. But who knows why they're spending less on this? Maybe they decided to write Uncle Gary out of the will, so now they don't need to save

as much. Maybe they decided the assets they already have are good enough inheritance for the kids. I mean, who wouldn't want a China cabinet full of precious moments figurines? Whatever the case, I recommend working with a financial advisor you trust to help you make a plan for leaving an inheritance. They can help you figure out all the details, including how to be able to be able to be smart when it comes to things like estate taxes. And side note, remember that leaving a legacy is about so much more than just passing on money after you're gone. It's also about making

memories with the people you love, passing on your family traditions and stories, and teaching your children and grandchildren the skills it takes to manage the money they're going to receive. You don't want them to squander at all on precious moments figurines like you did, Brenda. What are we going to do with these precious moments? They're creepy. Dude, they're precious. All right, let's move on to the next retirement cost, people overestimated. People who are not yet retired estimated they would spend 5% of their income on this, but retirees said they actually spent only 4%. And that is investments.

And look, here's the deal. You're retired. You're finally in the stage of life you've been working toward for so long, and this is the time to reap the rewards of the investing you've already done. And this is when you get to enjoy that money and use it to live and give like no one else. So I'm not surprised most people only spend 4% of their income on this. Because at this point, investing isn't something you should really have to worry about, unless you just want to do it for fun or it's part of your plan to leave an inheritance.

All right, let's move on to the next expense people thought they'd be spending more on in retirement. And just like the last two, people who were not yet retired thought they'd spend 5% of their income on this, but retirees said it only takes up 4%. And it's this, supporting family members. And that's what happens when you forget to call grandma on her birthday, Sean. You cut off, disown, out of the will. Eagally, I'm disowning you. Now, to be clear, we don't know why retirees are spending less.

on family than they had planned, maybe their family's doing fine on their own, and it could be that retirees are needing to use that money for other things like groceries, model trains, or where there's originals. That's where I assume most of the money goes. What did you know? Whatever the reason is, I'm sure the grandchildren will understand, and if not, they can always talk it through with their therapist. And speaking of therapy, today's video is sponsored by BetterHelp.

Sometimes the important things in life, like your goals or your grandma, take a backseat to the urgent things, like putting out the latest fire at work or getting caught up on golden bachelor. But therapy is a great way to help you focus on what really matters to you. And BetterHelp is designed to be convenient, flexible, and suited to your schedule. Simply fill out a brief questionnaire to get matched with a licensed therapist and you're ready to go. So learn to make time for what makes you happy with BetterHelp. Visit BetterHelp.com slash George today to get 10% off your first month. That's BetterHelp, H-E-L-P-com slash George. Okay, the next retirement cost people overestimated is costing retirees even less than the

things we've already talked about. People who are not yet retired expected to spend 7% of their income on this, but retirees said they only spend 2% of their income on it. And it's this, long-term care expenses. And this is good to hear, because long-term care can be wildly expensive. Which is why I recommend long-term care insurance for people over 60. Now, this covers the cost for a nursing home, assisted living facility, or in-home care when you get older and start dealing with health issues. Now, I don't recommend getting this before you turn 60, and here's why. About 92% of long-term care claims are filed by people older than age 70. The average 60-year-old man will pay $1,200 a year for a policy that covers $165,000 in care.

The average 60-year-old woman will pay $1,960 for the same coverage. And the average 60-year-old couple will pay about $2,500 a year for a combined policy. Now, that might sound like a lot, but it's less than what some people have paid to see Taylor Swift. There's absolutely nothing wrong with being a Swifty. And it's not a cult. Plus, the typical cost for just one month in a nursing home in the United States is $8,910. That's wild. So most long-term care policies work out to be a bargain in the long run when you consider what you get in return.

Okay, the next thing on the list of retirement costs people overestimated might be surprising. People who are not yet retired estimated they would spend 15% of their income on this. But retirees said it takes up only 12% of their income. And that expense is health care. Now, 12% still a decent income. chunk of change. And I'm not surprised. Healthcare costs increase as you get older and your body starts to require a little more maintenance, shall we say. A recent study projects that the average healthy 65-year-old couple retiring this year will need just over $387,000 to cover health care

costs over 20 years. Now, that's over $19,000 a year, which comes out to around $1,600 a month. So even though retirees reported spending less than they expected on health care, keep in mind that it will still end up being a pretty good portion of your budget. So get with an insurance professional you trust and talk through your health insurance, Medicare benefits, and any health savings account you might have, and make sure you're doing what you can to keep those health care costs as low as possible.

Okay, so those are the five retirement expenses people overestimated. But there was one big thing that people underestimated, and it's so big it takes up over half of their retirement income. And that is basic living expenses, things like food, utilities, and housing. Now, people who are not yet retired estimated they would spend 42% of their income on this. But retirees said they actually spend a whopping 53% of their income on basic living expenses. That means if your retirement income is $100,000 a year,

you'd be spending $11,000 more per year on living expenses than you thought you would. And after just five years of retirement, you will have spent $55,000 more than you planned. That's a big freaking deal. Everybody panic! But listen, as long as you're budgeting, yes, even in retirement, retirement, you should know what your living expenses are going to be. This shouldn't come as a surprise. So an easy solution to this expensive problem is to start budgeting now and keep budgeting even in retirement. And by the way, if you're following the seven baby steps, which I highly

recommend, there's a good chance you'll have paid off your house by the time you retire. So your housing expenses should be way down, and that's likely your largest living expense. Yes, you'll still be paying for things like utility bills and property taxes, but not having that mortgage payment is going to make a huge difference and give you a lot more margin for things like paying for your grandkids college, buying CDs at Cracker Barrel, or taking trips to Branson with the ladies from Walking Club.

You know how much Ethel loves a good Elvis-themed dinner theater show with a patriotic tribute three-fourths of the way through. Why else would she have a bumper sticker that says, Let's go Branson? Oh, it said Brandon. Huh, must be your grandson. That's sweet. That's not what it means.

Okay, well, bottom line here, make sure that you've got a clear picture of how much money you'll need in retirement, and don't underestimate the cost of everyday living expenses. And if you want to know if you're on track with the retirement investing, check out this video to see exactly how much you should have in your 401k based on your age. You can also click the link in the description. As always, make sure to like, subscribe, and share this with all of your real friends.

You know, the ones who you'll invite to your 85th birthday party in Branson to see the Elvis-themed dinner theater show with a patriotic tribute to be force of the way through. Thanks for watching. We'll see you next time.