Seven Surprise Retirement Expenses

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3/13/2024

Updated:

3/13/2024

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You’ve worked your whole life to come to this party—your retirement party. You’ve saved and planned for this moment, and you’re looking forward to the upcoming years.

But have you really planned for everything? There are expenses lurking that can blow a hole in a retirement budget. What are seven retirement expenses?

1) Uncovered Medical Expenses

One of the biggest surprises for retirees is medical expenses. To start with, Medicare isn’t free. You pay for it. And many find out the hard way that Medicare doesn’t cover all medical expenses.

Medicare has Part A, which covers hospital stays, and Part B, which covers doctor visits. All other expenses, including the copays, are paid out of pocket.

So, that means you must pay for additional insurance plans to supplement Medicare.

You’ll need a Medigap plan to supplement Medicare. And you’ll need to pay for insurance to cover hearing, vision and dental.

Medicare doesn’t cover prescriptions, so you'll also need a policy for that.

2) Outliving Savings and Investments

Most people retire in their mid-sixties, and the average length of their retirement is 20 years. Do you have enough investments, savings, and Social Security benefits to sustain you for the next 20 years or longer?

You may live for a long time but cannot care for yourself. Having the funds for home health care or assisted living should be part of your plan.

And, finally, in case you become incapacitated, long-term care insurance should be part of your retirement plan.

3) Losing a Spouse

Losing a spouse is an emotional hit, but it can also hurt financially. First, you must pay for the funeral. The median cost of a funeral is $7,848. Will this expense hurt you financially?

If you both receive Social Security, one check is about to disappear. You can choose the higher benefit as a survivor, but it’s still less.

Think about this when you’re making plans to retire. The longer you work, the larger the benefit, and possibly a larger survivor benefit for your spouse.

Because income disappears when a spouse dies, purchasing life insurance before retiring is prudent.

When purchasing life insurance, review your net worth and future income goals. Consider what would be lost if a spouse dies, and plan your insurance benefits accordingly.

If your spouse or you have a pension, check before you retire about survivorship benefits. When you opt for a survivor benefit, it reduces the monthly payment. But it allows the surviving spouse to continue receiving benefits after the spouse dies.

4) Adult Children or Aging Parents

You might be part of the sandwich generation if you’re Generation X. That’s where you have adult children living at home and aged parents who need care. This can drain a savings account.

Even if the adult children aren’t living at home, many retirees still give some support to their grown children. If you want to do that, ensure you budget with this in mind so you don’t drain your savings.

If you have older parents, you may find yourself supplementing their care. When you plan on retiring, consider the needs of your aging parents now and where you think they will be. Then, plan your retirement budget with that in mind.

5) Unexpected Housing Costs

How old is your home? Almost 80 percent of people 65 and over own their house. Most of them bought it years before retiring. Is the roof new? Are there any problems with the furnace? How about those leaky windows?All of these are major expenses.

Have your home inspected before you retire to uncover any surprises while you still have a higher income. One percent of your home’s total value should be the yearly budget for maintaining your home.

Does your house have stairs? If you plan to live in the house for a long time, you may need to make upgrades and disability-related accommodations. If you become wheelchair-bound, can you go through the door?

This is not the fun part of retirement, but it is better to plan for it now than to be surprised later.

6) Underestimating Monthly Expenses

Sit down and go over monthly expenses. Take into account:

home
utilities
insurance
food
gas
taxes
etc.

Every monthly bill should be counted. Add your hobbies or leisure time expenses once you’ve determined your monthly expenses.

The point is to know exactly how much money you'll need on an ongoing basis before you go on that trip of a lifetime.

7) Inflation Eats Away at Savings

Inflation has caught a lot of retirees off guard in the past few years. It ate away at retirement savings accounts.

It’s important to have savings in high-yield accounts and diversify investments to stave off inflation.

Even if we have 3 percent inflation yearly, in 20 years, inflation will slash through your retirement.

Be Prepared Before Retiring

Numerous surprises happen after your retirement, and many of them are financial. So, protect your nest egg and plan out your retirement. Don’t just think about that boat or trip you’ve been meaning to take—think worst-case scenario.

It’s not the fun part of retirement, but it’s necessary to ultimately enjoy your retirement.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.