Unexpected Costs in Retirement

by Emily Guy Birken · 8 comments

We all have a view of what retirement will look like: long days of fishing or golfing, relaxing on the front porch, enjoying grandchildren, spending time with friends.

Unfortunately, simply being retired does not mean that problems suddenly disappear — least of all money problems. No matter how well you have planned and saved, you could get blind-sided by an unexpected retirement cost. The solution? Leave room in your portfolio for one of these five common retirement pitfalls:

1. A Not-So-Empty Nest. While the economy is certainly recovering, the downturn and resulting high unemployment did make it clear that adult children sometimes have to come home for a while to get back on their feet. For retired parents who are opening their doors to laid-off, unemployed, or otherwise down-and-out grown children, it’s important to make sure that you set clear boundaries regarding the amount of help you can offer. Otherwise, you might find that you’ve got too much retirement left when your money runs out.

2. Health Care Costs. Even if you have a plan in place for your post-retirement health care expenses, it’s imperative that you factor in the number of costs that will not be reimbursable. Some drug plans and some prescription drugs are not covered by Medicare, and many (if not most) dental and optical visits will entirely be paid out of your pocket.

It is important to plan for a financial cushion in your retirement portfolio in order to pay for potential health care costs, but it’s also a good idea to take great care of your health. You’ll feel better and have fewer costs to worry about.

3. Home Maintenance and Repair. If you decide to stay in the home you’ve always lived in, don’t forget that it, too, is getting older. Homes eventually need roofs and boilers replaced, plumbing updated, HVAC systems repaired, and so on. Even if you have always taken care of your home maintenance yourself, it’s a smart idea to set aside money specifically for any repairs that might need to be done.

Alternatively, consider downsizing. Moving to a low-maintenance apartment, condominium, or retirement community could not only save you maintenance costs, but it might also be a cheaper housing option for you.

4. Long Term Care. According to the Congressional Budget Office, 24% of people turning 65 will need to spend at least a year or more in a nursing home. Unfortunately, Medicare will not cover the majority of your long-term care expenses. You need to plan ahead for the possibility that you might fracture a hip or come down with an illness.

Your best bet is to purchase a long-term care insurance policy before you retire.

5. Travel. While you might have no plans to go any further away than the local golf course or hobby shop, travel needs can sometimes sneak up on you. For example, if your children and grandchildren end up moving out of state, the expense of visiting is something you might not have planned for. Similarly, if you end up taking care of a parent, sibling, or friend somewhere else in the country, you might find yourself facing some unexpected travel expenses.

The Bottom Line

No matter what your situation, it always pays to plan for some retirement wiggle room, just in case.

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{ read the comments below or add one }


    Bangladesh is my country n working in private organization. like develop country we don’t have any pension policy by enlarge. there r provident n gratuity scheme but due to change of organization it does not very effective. always we start from zero. govt has good scheme for her employees but no such for private firms. life insurance policy is there but not up to the mark.
    the way peoples of develop counties r thinking it praise worthy for me n accordingly i am preparing for me self.
    i felt that how i can spread it to my society,how i can aware my fellows to build a fund for retirement? during my interaction i raise this issue but get mix response, some r surprising sp from mid age group.
    David your communication n subjects r imp n referring to others. i m 57 +.
    with best regards.

  • Kate says:

    I’m 65 and have just retired. I lost all my retirement savings in three disastrous stock market crashes. However, I have lived a very conservative, frugal lifestyle since I went out on my own — never ran up debt, don’t own anything, have no children or grandchildren, only an elderly cat — and in all respects have learned to cut my coat to fit my cloth. I did extensive travelling when I was younger; however, I travelled “on the cheap” and the costs were paid before I left or in cash at the time of incurring them. (I once came home from England with 12 cents in my pocket.) I believe a lifetime of maintaining a lifestyle considerably below what you are able to earn, and not running up debt, will prepare you for a happy retirement too. Know Thyself is not only important on a philosophical level.

  • aeko says:

    I am 70, my house was built in 1939, my car is 15 years old, and my pets are aging both at 14 years of age. Money is flying out the window for all of this aging care. And I am female which means in my lifetime I earned less. I am very frugal but money is really an issue, wish I had saved and planned better.

  • Roger Wohlner says:

    Excellent post. As a financial planner I see this firsthand via several of my clients. As Kathryn comment someone who is 65 might live another 30 years or so. Delaying retirement even a couple of years can make a difference in terms of one’s nest egg, as can generating some sort of income into retirement from PT work, a second career, etc. Between increased longevity and the prospect of increasing inflation over the next few years navigating the financial aspects of retirement is not getting any easier.

  • Jonathan@Friends and Money says:

    I think that finances will become increasingly stretched in the future and so planning now for retirement is a great idea. Healthcare costs a huge worry for many people especially. I try to automate my savings in order to get a regular saving plan going.

  • Lance@MoneyLife&More says:

    Definitely need to save as much as you can for retirement. Glad you pointed out some things a lot of people don’t’ consider. Even if the mortgage is paid off repairs and maintenance go up as the house gets older.

  • Kathryn C says:

    I wish you could hear how many times my dad says to me “You kids don’t understand how much retirement costs!”

    He is 65 and retired. They spend a lot of money traveling etc, so he makes the same point that you do there.

    Sixty-five is young these days. You could live another 30 years, that’s 30 more years of spending. And who knows how much “depends” will cost when we’re in our 90’s. A lot more I’m sure.

  • Marbella says:

    I am not sure what the retirement system is in the U.S., but in Sweden we have free healthcare, free nursing homes, etc. We of course must still plan financially for our retirement, as everything will cost more every year.

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