It’s become fashionable these days for advisers to warn retirees and pre-retirees to set aside enough money to pay for health care in their golden years.

Folks might be better served if they were told to make sure they first have enough income and assets to pay for housing and home-related expenses after age 65.

That’s because those expenses — mortgages, property taxes, insurance, utilities, home maintenance, and the like — comprise the largest spending category for older Americans, according to a new report published by the Employee Benefit Research Institute (EBRI), a private, nonpartisan, nonprofit research institute based in Washington, D.C.

Yes, health-care expenses increase steadily with age, and remain a big cause of concern, but the cost of maintaining a home is typically the biggest expense for older people. EBRI said.

To be fair, the dollar amount spent on housing and home-related expenses decreases with age. But the share of these costs in household budgets remain stable at between 40% to 45%, depending on age group, EBRI said in a release.

Consider: Households age 60-64 spent on average $18,720 or 43% of total expenses on housing in 2011, adjusted for 2013 dollars; households age 65-74 spent $14,732 or 42%; and households age 75-plus spent $13,111 or 44%. Or put another way: you’ll need roughly $250,000 set aside at age 65 to pay for 20 years of housing expenses.

To be fair, EBRI found in its analysis that health expenses increase steadily with age. In 2011, for instance, households with at least one member between ages 50‒64 spent 8% of their total budget (or $4,176) on health items, compared with 19% (or $6,603) for those age 85 or over. And health-related expenses do occupy the second-largest share of total expenditure for those over age 75, EBRI noted.

But housing is the cost no one is really talking about.

Of course, health care can be a budget buster, too. For instance, EBRI also found a large increase in spending at the 95th percentile for those age 90 or older, which can be attributed to very high health-care expenses.

But much of that expense is associated with end-of-life care. “For some, health-care expenses can be heavily skewed toward the end of life,” Sudipto Banerjee, EBRI research associate and author of the report, said in a release.

For example, Banerjee said, in 2011, the (midpoint, half above and half below) health-care expenditure for households with at least one member 85 and above was $2,814, while the average was much higher at $6,603.

And costs can be especially troublesome for households that fall in the 95th percentile, the worst-case folks. In that percentile, health-care expenses ranged from $13,918 for those households age 65-79 to $28,339 for those ages 90 and above. “If withdrawals are not well managed then by that time many (retirees) may have little left in their nest eggs,” said Banerjee.

read more…

http://www.marketwatch.com/story/housing-is-biggest-expense-for-retirees-2014-09-30?siteid=yhoof2