What do you consider to be basic expenses?
When you hear the term “basic expenses” you may think about: the cost of housing, healthcare, food, and things of that nature. We recently completed a study where we asked retirees and pre-retirees what they define as basic expenses. While housing, food, and healthcare are all on the list – some of the other basic expenses they identified may surprise you.
- Internet access is integral to having a comfortable retirement. For both Pre-Retirees and Retirees, having an online connection is on par with the “must haves” of healthcare coverage and staying in their home. While most of the items asked about in the survey are considered luxuries, majorities in both populations also consider other technology-related items, specifically smart phones and high definition TV, to be things they can’t live without. Pre-Retirees more often consider smart phones a basic need whereas Retirees more often say high definition TV is a basic expense.
- Some innovations and technology-related items are more apt to be viewed as non-essentials, especially among Retirees. For example, music streaming, video on demand and transportation services like Uber and Lyft are largely classified as luxuries. However, one in four pre-retirees considered music streaming and Uber and Lyft transportation as basic expenses.
- Dining out is a luxury for most consumers. In 2010 most consumers considered dining out to be a basic expense. Fast-forward to 2017 and it appears consumers are being a bit more frugal - dining out is now considered a luxury.
- Consumers generally don’t change a lot over time in terms of how they view the broad classification of basic expenses vs. luxuries. Overall, about half of Pre-Retirees and just over a third of Retirees say they have changed their views over the past 10 years. Yet the proportion of changers for individual luxury items that were formerly basic is typically under 15%, and for basic items that were formerly luxuries, typically under 10%. Two exceptions are dining out (23% of Pre-Retirees and 21% of Retirees now identify dining out as a luxury instead of a basic expense) and access to the internet (17% of Pre-Retirees viewed this as a luxury ten years ago).
Source: 2017 NYL Consumer Retirement Income Plan conducted by Greenwald & Associatesning Study
How can you be sure your savings are enough? One solution can be income annuities, which help convert a lump sum of your retirement fund into a steady, reliable cash flow for the future.