Once people reach retirement age, their spending habits often change. Housing, healthcare, and daily expenses like groceries will still take a significant part of the budget, of course. However, since retirement often means more free time, it may also provide opportunities to pursue activities and acquisitions that may not have been possible during the working years.
If you're retired or about to be, think about whether you want to budget for any of the following. If you're not there yet, read, dream—and start saving.
- If you saved up enough for your retirement, you may want to start planning what to do with the extra income that your assets might generate.
- If you want to focus on a retirement that is leisurely or adventurous, budget funds for travel, including perhaps splurging on an RV for cross country trips.
- Many retirees also take the opportunity to pick up new hobbies, or even purchase a second home.
The freedom to get in the car or take a bus or airplane to a faraway destination is one of the first things many retirees want to experience.
Still, others begin going on cruises or continue a life-long “cruise” habit with more intensity and seasonal flexibility this time around.
With the average cost of summer vacation coming in at approximately $1,979, it’s important to set aside funds for travel in the yearly budget. Off-season trips—one benefit of being retired—can cost less, while big-deal exotic vacations can cost way more.
You may have hefty retirement expenses such as medical expenses or retrofitting your house so you can 'age-in-place," but don't overlook planning for recreational expenditures that can improve your retirement experience, such as travel and picking up new hobbies.
For some, retirement means buying a full-sized or mini motor home and taking to the open road. How much you'll pay for a motorized RV depends on the type and age of the vehicle. According to the website CostHelper, prices for a brand-new Class A motor home start at $50,000 to $100,000; a customized model could cost between $500,000 and $800,000. Camper Vans, also known as Class B, cost between $40,000 and $80,000 new, and Class C, mini motor homes range from $50,000 to $80,000.
Buy any of these second-hand, and the cost drops 20% to 30% below the original price after just a few years, according to CostHelper.
For those who have already traveled the world—or have no desire to do so—retirement often becomes a time to move to their favorite destination on a semi-permanent basis.
Owning a second home can cost about as much as owning a first home, unless it is in a less expensive community. Other variables include the type of dwelling, its location, and whether it is occupied all year long or just part of the year. According to the National Association of Realtors, the median price paid for a vacation home in 2018 (the most recent year available as of 2020) was $259,300.
A less costly option than a traditional house or condominium is a mobile or manufactured home in a mobile home park near a beach or other vacation-friendly location. According to Foremost Insurance, a single-wide (1,000 square feet) mobile home costs about $24,000. A double-wide (1,600 square feet) averages $43,000. These are factory-made and transported to the housing site. Be aware that when you buy a manufactured home that is already on a site, the homeowner may not own the property on which the house sits.
An even less expensive option—and much smaller—is a "park model" trailer. These are one-bedroom RVs with about 400 square feet of living space, designed for long-term or permanent placement at a campground or mobile-home park. Unless you own the land where it will be sited, remember to factor in rental costs and fees for the campground or mobile-home park when budgeting for a manufactured house or trailer home.
For many retirees, retirement means the chance to participate in previously part-time hobbies. Among popular hobbies for people over age 65 are boating, golf, fishing, antiquing, photography, model-building, gardening, volunteering, genealogy, and knitting. Some hobbies are less expensive than others depending on the tools and gear needed for the activity. For example, a new digital camera purchased online could cost you around $500, but a small fishing boat could be $25,000 or more.
The Bottom Line
The most important thing seniors need to do, especially when contemplating a large retirement purchase or investment, is to make sure it fits in their budget. For those who are not yet retired, planning for those big expenditures is can make sure they happen when the time comes.