Upward pressure on retirement living expenses is largely driven by inflation and health care.
Retirement isn’t cheap.
Financial planner Katie Vercio estimated that the living expenses for Money Makeover clients Eric and Lenor VanderWaal could be about $128,000 in 2041, the first year when both are retired. And the annual price tag just goes up from there, to about $178,000 in 2067.
Upward pressure on retirement living expenses is largely driven by inflation and health care, said Vercio, a financial planner at the Bellevue office of investment advisory firm Evergreen Gavekal.
The consumer price index has increased an average of 2.2 percent a year for the last 20 years, according to the Federal Reserve Bank of St. Louis. But the price of medical care during that time rose faster, at an average annual rate of 3.6 percent.
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The take-away: Future retirees should not expect Social Security benefits to keep pace. Although the Social Security Administration boosted the benefit 2 percent this year, the 10-year average for annual increases is 1.66 percent.
In retirement, Vercio said, “your expenses will likely grow faster than your income.”