You no longer have to budget for work clothes or commuting. But you may have to start paying for some things that you used to receive as perks through work, such as a company car, meals, travel or computers. "Small business owners and professionals who retire are often surprised how many of their expenses were picked up by their company," says Bert Whitehead, president of Cambridge Connection, in Franklin, Mich. "It is a jolt when they discover how much it adds up to."
Many retirees plan to see the world in their first few years of retirement, but the costs of transportation, lodging and entertainment can add up quickly. Retirees' actual "travel budgets tend to be at least 10% to 20% higher than what had been budgeted," says certified financial planner Debra Morrison, of Trovena's Roseland, N.J., office. Even if you stay put, you'll have free time to fill, and activities, such as golf or fixing up the house, cost money, too. "We tell clients that the 'common wisdom' that retirees spend 75% of what working people do is a dangerous thing to believe. We do goal setting to discover how they actually picture their retirement, and then try to place a price tag on it," says certified financial planner Barry Kaplan, of Cambridge Southern Financial Advisors, in Atlanta.
Those first few years in particular may be expensive as you enjoy your freedom from work, so budget accordingly when drawing up your retirement income plan. "Retirees desire to travel and become more active in the lives of their children and grandchildren," says certified financial planner Lazetta Rainey Braxton, of Financial Fountains, in Chicago. "It's hard to plan for activities and 'unassigned gifting' when a retiree has never set aside these 'line items' in their budget."