This is part three in a series on preparing for retirement. If you’re just joining us, please check out parts one and two to get up to speed.

Previously, we looked at how you can get started on planning for your retirement by adding up your current assets to understand how much they are worth. We followed this up by exploring some ways to diversify your current investments to potentially get greater returns over time. Another important aspect of retirement planning is planning on how much your expenses will cost over time. This way, you’ll be able to better determine whether or not you have enough money to span your entire retirement.

When looking at how much money you have saved compared to the estimated cost of your retirement, you need to take special care to adjust for inflation. Unfortunately, there is no way to determine how much inflation will go up in the future – we have data from the past to make assumptions on, but it isn’t necessarily helpful, as inflation has varied widely in the past. Additionally, you’ll need to consider the rising rates of medical costs, which have risen even faster than the rate of inflation over the last twenty years, and they are continuing to rise more quickly. Generally speaking, most people spend about twenty percent of their retirement income on health care alone. Medicare doesn’t cover everything, and even if you are reliant on it, it can cost anywhere from $100-$400/month for most individuals, and it will only cover about 85% of health care costs.

Another priority that you should plan for is your housing needs. Even if you own your home, you’ll need to factor in things like maintenance, cooling and heating costs, and real estate taxes. You might want to look into alternatives to traditional housing, such as independent living retirement communities. Many times these have large down payments associated with them on top of monthly fees, but many individuals prefer these types of living arrangements over nursing homes. To begin to save for these types of costs, you might want to inquire about setting up an has account at your place of business. An has is a savings account that you can put money in to save for health care costs later in your life. If you do not have a health plan through your work, you can likely set up an has with an insurance company or bank.