Prepare for Unexpected Expenses in Retirement

Even the most well-planned retirement can be disrupted by unforeseen expenses. Many retirees underestimate how unpredictable certain costs can be—and how easily they can derail an otherwise sound financial strategy.

There are five categories of expenses that commonly catch retirees off guard. With proactive planning and an effective financial strategy, however, you can feel more confident about the road ahead—and protect your retirement lifestyle from surprise detours.

1. Hidden Housing Costs

While many retirees own their homes, that doesn’t mean housing costs disappear. Nearly 80% of adults over 65 are homeowners, but owning a home can come with costly surprises that are often overlooked during the retirement planning phase.

• Home maintenance and repairs: Unanticipated home repairs are one of the most common financial shocks in retirement. Aging properties may need new roofs, HVAC systems, plumbing upgrades, or foundational work—often at a steep cost. Budgeting 1% of your home’s value annually for upkeep is a good starting point.
• Property taxes and HOA fees: Local tax rates can rise over time due to changing municipal budgets. Similarly, homeowners association fees can increase unexpectedly, especially if special assessments are issued.
• Accessibility modifications: If you plan to age in place, you may need to invest in upgrades like ramps, grab bars, or wider doorways to accommodate mobility needs. These renovations can be critical for safety but come with a price.
• Downsizing costs: Selling your home, relocating, or moving into a retirement community can come with substantial moving and transition expenses—not to mention potential real estate fees, closing costs, and deposits.

Without proper planning, these hidden costs can quickly eat into your fixed income or emergency fund, impacting your ability to enjoy the retirement you’ve envisioned.

2. Uncovered Healthcare Costs

Medicare is a lifeline for many retirees—but it’s not a blanket solution. Original Medicare includes Part A (hospital care) and Part B (medical services), but leaves out essentials like dental, vision, hearing aids, and many prescriptions.

Here’s what to plan for when managing healthcare costs in retirement:

• Out-of-pocket costs: Copays, deductibles, and supplemental premiums can add up. The average out-of-pocket healthcare costs in the US are around $1,425 per person per year. However, this can vary significantly based on factors like insurance type, age, and overall health.
• Gaps in coverage: Original Medicare doesn’t cover certain categories of care, like dental, vision, hearing aids, and prescriptions without a Part D plan. These omissions can be especially challenging for retirees with ongoing medical needs or chronic conditions.
• Specialist or alternative treatments: Not all treatments or providers are covered, especially under more restrictive plans like Medicare Advantage. These out-of-pocket costs can be unpredictable and vary widely by treatment type, provider, and location.

Combining Medicare with a supplemental policy or choosing a more comprehensive Medicare Advantage plan can help, but each comes with its own trade-offs.

3. Long-Term Care

It’s one of the biggest blind spots in retirement planning: the cost of long-term care. Nearly 70% of today’s 65-year-olds will need some form of long-term care, for an average duration of about three years. Yet many retirees have not planned for this possibility at all.

Types of care and their potential costs include:

• Home care: The convenience and comfort of home care can be expensive—especially if 24-hour care is needed.
• Assisted living and nursing homes: In 2021, the national average cost for a private room in a nursing home was $108,405 per year. These facilities can provide important medical and social support but may require substantial out-of-pocket funding.
• Long-term care insurance: If purchased early—ideally in your 50s or early 60s—long-term care insurance can help offset long-term care costs and protect your savings. It’s important to note that premiums can rise over time, and policies vary in coverage, waiting periods, and benefit durations.

Assess your family’s health history, financial situation, and retirement goals to decide what level of care and coverage makes the most sense for you and your family.

4. Family Crisis

Familial obligations can lead to significant financial decisions that weren’t part of the original retirement plan.

Here are a few scenarios to consider:

• Aging parents: Covering healthcare or living expenses for older parents may stretch your own resources. It may also impact your ability to travel, volunteer, or pursue hobbies you’d planned for retirement.
• Adult children in crisis: A job loss, divorce, or medical emergency might lead your children to lean on you for help. Consider discussing or setting financial boundaries, however, in order to safeguard your own financial stability.
• Divorce in retirement: Later-life divorce can split retirement assets and reduce household income. It can also affect healthcare coverage, housing, and legacy planning.
• Loss of a spouse: Beyond the emotional toll, losing a spouse may reduce Social Security or pension income. Survivor benefits, life insurance, and estate planning should all be reviewed regularly.

5. Inflation and Cost Adjustments

Even small, gradual increases in the cost of living in retirement can significantly alter your long-term financial picture, especially when paired with market volatility.

Key concerns include:

• Everyday essentials: Food, gas, and utilities have all seen price increases that outpace general inflation rates.
• Healthcare inflation: Medical costs tend to rise faster than other sectors, putting added pressure on retirees with fixed income.
• Investment risk: Market downturns or lower-than-expected returns can disrupt your income stream.

To mitigate the impact of inflation, your retirement plan should include diversified income sources, tax-efficient withdrawal strategies, and periodic portfolio reviews with your financial professional.

Work With Your Financial Professional to Stay Prepared

A well-structured financial strategy anticipates the unexpected and gives you the confidence to adapt when life changes course.

Your financial professional can help identify risks, adjust for rising costs, and align your plan with long-term legacy goals. With proactive planning, you can face life’s uncertainties with the confidence that comes from knowing the way forward.

Ready to safeguard your retirement?
Contact the office today to start building a flexible, resilient retirement plan that goes beyond savings.

^{This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.}