Calculating your retirement savings? Make sure your math isn't off.

Estimating retirement costs can be challenging, but there are a lot of variables to consider when it comes to saving money. Read on to see if your money math is wrong.

Sarah A. Miller/The Tyler Morning Telegraph/AP
Retiree Bill Coleman and his son Hub Coleman fish at the Meadow Lake Fishing Derby Friday, June 12, 2015, in Tyler, Texas. Estimating retirement costs can be tough, but it is important to make sure your money math isn't wrong.

Saving for retirement is tricky, in part because you don't really have a clear idea of how much money you'll need when you stop working. There are many variables to consider, and a lot of our assumptions about the cost of retired life may also be incorrect.

The best way to deal with this uncertainty is to simply save and invest as early and as much as you can. But in the meantime, be aware of these reasons why your retirement cost calculations may be off.

1. Your Overall Expenses May Be Less Than You Think

There's a common assumption that people should save enough to "maintain their current lifestyle." But the reality is that most people start to spend less as they get older. The Bureau of Labor Statistics reports that a person's expenses peak between ages 45 and 54 at about $62,000 annually. Then, expenses start to decline. Those older than 65 spend about $42,000 a year, on average. And those older than 75 spend just $35,000 annually.

2. Your Might Pay Off Your Mortgage

When calculating your future living expenses, are you assuming that you'll eventually own your home free and clear? BLS statistics show that while only 19% of homeowners between ages 45 and 54 live mortgage-free, that figure jumps to 35% among people aged 55 to 64. Meanwhile, two-thirds of all homeowners over 75 are living free of house debt.

3. You Eat Less as You Age

While it's nice to assume that you'll be dining on lobster tail and caviar in retirement, the truth is that older Americans decrease their food expenditure as they age. A typical person at age 50 spends roughly $8,000 annually on food, according to BLS, dropping to $5,400 by age 65. Older people also dine out less. An average 50-year old will spend $3,279 on food away from home. That will drop to just over $1,300 by age 75.

4. You'll Drive Less

Think you'll be going on a plethora of road trips in retirement? Statistics show that older people actually drive less over time and spend far less on car purchases and automotive maintenance. An American's average expenditure on transportation peaks between ages 35–44 at just under $11,000 annually. That drops to $6,700 by age 65 and $4,800 by age 75.

5. You're Calculating Your Social Security Payments Incorrectly

When you use the Social Security calculator provided by the Social Security Administration's website, you will usually receive three numbers. The first is based on age 62, or early retirement. Another is based on age 66 (full retirement), and a third number is based on age 70 (maximum benefit.) To calculate your payments correctly, you must be honest about when you think you'll need to begin collecting. It's also worth noting that some observers don't even trust the government's calculations in the first place.

6. Social Security Payments May Be Adjusted in the Future

Younger Americans may be faced with the reality that Social Security benefits may change by the time they reach retirement age. The government openly states that by 2033, payroll taxes will only cover 77 cents for every dollar of scheduled benefits. Rest assured that whatever we think we'll be getting in benefits by the time we retire, the reality will change between now and then.

7. Your Investment Returns Won't Be as High as You Assume

Younger investors tend to assume that the stock market will grow at an average of about 9% per year, but may forget that investment returns could be less in later years as they move to more conservative investments. As you approach retirement age, it makes sense to put more of your money in bonds, cash, and other stable vehicles. But it's important to remember that this may impact the total amount you save.

8. You Are Not Calculating the Correct Length of Retirement

There's a rule of thumb that assumes each person should plan for a 30-year retirement. But this number is based on an average, not each individual. If you have many family members that lived into their late 90s, you may need to save more to make your money last. It's also important to extend the length of your retirement if you retire at a relatively young age. Someone who retires at age 50, for instance, could see a retirement of 40 years or more.

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