The Four Categories of Lump-Sum Expenses in Retirement

Robb Engen talks about the four categories of retirement expenses many people forget to budget for.

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I find a lot of people, especially the DIYers, but even some others, don’t do a good job of budgeting for lump sum expenses that they’re still going to have in retirement.

I mean, you’re still going to have to put a new roof on at some point if you’re staying in your home. You’re still gonna have to buy a car. It really helps to meld that into your tax planning. Where is that money going to come from? You’ve thought about it in advance, so you can make it all part of the approach you’re taking.

Yeah, and I insist that my clients sort of think through that. I always say there’s like four categories of one-time expenses that are going to come throughout a thirty-year retirement. There’s vehicle replacement, there’s home renovations or repairs, planned or unplanned. There are financial gifts to maybe kids or grandkids or nieces or nephews.

And then there might be the bucket list trip, right? That you’ve, you know, been waiting to do, the African safari or the trip to New Zealand or the trip to Europe. Um, so yeah, let’s weave those into the plan to see where exactly they’re going to be coming from. Is it TFSA? Is it some non-registered money?

Are we saving up for it in advance? Um, I think it’s crucial to think about it. Life doesn’t move in a straight line. We can’t just expect to spend sixty thousand or eighty thousand a year without those lumpy, periodic, uh, one-time things happening.