Retirement: How Much Money Do You Need?

by Christine

How much money do you really need to retire? We see commercials on TV that bandy around figures like 1.2 or 1.5 million dollars. Is that reality or is that what the major financial houses need, to make your investment valuable to them? Over the next few weeks, Footsteps will take a look at what it takes to retire and you decide whether “retirement” is in your future.

First, as in pre-retirement, housing can be the largest budget expense. There are several types of housing available to consider during retirement. Footsteps will use the Ben Franklin decision method to weight the pros and cons of the different housing choices once we explore the cost and benefits surrounding a single-family home, rental apartments, cooperatives and condominiums, independent living communities, assisted living communities and nursing or care homes.  

The Single Family Home: 

Home ownership is regarded by many as an outward sign of success in the United States, a fulfillment of the American Dream. It is not just a place to live but it symbolizes freedom and achievement. Government leaders, family and friends and our financial advisers encourage us to start saving for a house the moment we take our first full time job. An emotional component exists in home ownership that does not exist in other types of housing. 

But what is the financial cost of a single-family home? For this discussion, we are going assert we are talking about a home that is paid for in preparation for retirement. The first non-discretionary cost in owning a home is taxes. Property taxes are the biggest source of revenue for local governments. When budgeting property taxes, the homeowner must remember that these are not fixed costs. The increases may be as little as one or two percent in poor economic times or six to seven percent in boom times but it is not in the DNA of government to decrease its budget.  

To learn more about taxes in your area, click  Additionally, to see the 10 States with the worst property taxes, click

The next budget item is home maintenance. This is an area that retirees tend to defer action in an effort to manage their overall budget. Many of us are related to or friends with someone who last updated their kitchen in the 1970’s or started using their dishwasher as a drying rack when it stopped functioning.  

The other challenge in budgeting maintenance cost is they are not necessarily fixed. If you retire at 65 in good health, caring for your own lawn and making small repairs yourself maybe very manageable but at 75 or 85 this may no longer be the case. Additionally, as you age, you may need your home to be retrofitted to accommodate walkers, wheel chairs and assistance in the bathroom. 

The recommendation of various housing and retirement experts is 1% of your home’s value. On a $200,000 home that would be $2,000 per year or $167 a month. When on a fixed or limited income, this may seem to be high but the average cost of replacing a roof is between $11,000 and $17,000. The cost of a new heating and air conditioning system can run between $3,500 and $4,000. As you can see, it quickly adds up with major purchases. 

Utilities are another major component of retiring in a single family home. Depending on the age of your home and lifestyle, cost of fuel and water can be the second costliest budget item. According to the EIA, the average residential monthly bill is $110.55 but if you live in Florida, you know that your electric bills may be well above the national average.

To calculate your budget for retirement, average the last two years of your electric, water, natural gas and heating oil bills. Keep in mind that these are not fixed cost. Heating oil costs are determined by marketplace pressures and can vary wildly based on political influences and natural disasters. For many water is the new gold and we may see its cost continue to rise. To avoid stress in the future factor in a percent or two increase yearly. 

Homeowners insurance is a must at any stage of ones life but particularly after retirement. Once you have fulfilled your loan obligation to your mortgage company and are no longer contractually bound to maintain homeowners insurance, you may be tempted to let it go. You need to think twice. The insurance not only covers the home’s structure and your belongings, it provides you with liability coverage. Lets say your home health nurse comes to monitor you blood sugar and trips on your front steps and breaks her ankle. The liability portion covers injuries sustained by others while on your property. Without it you could find yourself in serious financial trouble.  

The costs vary by state but the average national yearly premium is $1.004. Before retiring we encourage you to review your policy with your insurance agent to learn if your coverage is still appropriate for you current situation.

For those living in New York, your monthly nut for living in a single-family home valued at $200,000 would look something like this:

Taxes (Putnam County Property Tax Rate) 1.65% or $3,300 a year/$275 a month 

Maintenance $2,000 yearly or $167 a monthly*

Utilities  $1326.60 yearly or 110.55 monthly* 

Insurance $1,004 yearly or $84 a monthly*

The total cost:

Yearly- $7630.60

Monthly-$ 635.00

*This is the national average and may not be a true reflection of the real cost in Putnam County, NY 

For those living in Florida, the initial budget looks something like this on a $200,000 single-family home:

Taxes $1,940 yearly or $162.00 monthly

Maintenance $2,000 yearly or $167 monthly

Utilities 1326.60 yearly or 110.55 monthly

Insurance $1,004 yearly or $84 monthly

The total cost:

Yearly- $ 6270.60

Monthly- $ 522.55

*This is the national average and may not be a true reflection of the real cost in Florida

Footsteps will be the first to acknowledge that these are rough estimates and that before deciding upon your final budget, you need to do more research. If you are currently living in a single-family home that you would like to make your retirement home, start keeping records. You will have first hand knowledge of what it has cost you to live in the home. Just remember, if you are going to err in your numbers, you want to err on the high side, not the other way around. 

If you are looking to relocate to another part of the country, you can rely on averages for the region. But you may also talk to a local real estate agent or ask the current owner to share with you utility bills and maintenance records. The goals here is to go into your retirement home with a workable budget so that you can spend your energy and time on activities that are fulfilling not spending your time stressing over money.