Dealing with Unexpected Expenses in Retirement

Dealing with Unexpected Expenses in Retirement

April 27, 2022

As you plan for retirement, it’s exciting to think of all the things you’ll have time to do, including traveling more, spending time with family, and even picking up a new hobby. However, in successful planning for retirement, you can’t solely focus on the fun stuff; you have to plan for the expenses along the way.

As in life, there always seems to be unexpected things that come up, and retirement is no different. In thinking about a retirement plan, you should expect the unexpected, allocating resources to the unknown and potentially taking the bite out of the speed bumps that come our way.  Here are some of the common surprise expenses that we see and, more importantly, strategies you can use to mitigate them.  

Healthcare Expenses

We have a robust Medicare system, but that doesn’t mean that every healthcare expense in retirement will be covered by insurance.  Your healthcare costs in retirement have the potential to skyrocket.

One example of a service generally not covered under Medicare is long-term care.  Medicare only covers short-term stays in skilled nursing facilities and is designed to cover specialized care and rehab after a hospital stay.  It can pay a portion of the cost for up to 100 days in a skilled facility, but you must be admitted to the facility within 30 days of leaving the hospital.  That’s not necessarily the same as what most think of as long-term care, which is more to help with day-to-day life or help complete the basic activities of daily living.    

In addition to long-term care, Medicare parts A & B may not cover expenses related to:

  • Dental care
  • Eye exams related to prescribing glasses
  • Dentures
  • Cosmetic surgery
  • Acupuncture
  • Hearing aids and exams or fitting them
  • Routine foot care

As you plan for retirement, consider all health-related expenses that may arise.

Home Maintenance

After retiring, you may find that you’re spending more time at home, and you might want to make some home upgrades. In our experience, it seems that everyone has a laundry list of home projects to complete as soon as they retire. While you can plan for many of these changes, some might arise unexpectedly. For example, if your health changes or you face a medical procedure, you may need to adapt your home to be more accessible.

Maybe you won’t require modifications for yourself, but you may find yourself in a situation where you have to care for a loved one. Whether it’s an aging parent, relative, or adult child, you may have to assist.  Even if these situations aren’t in your initial plan, planning for unexpected home maintenance in retirement could prove worthwhile.

Hobby Expenses

Retirement is a time to celebrate everything you accomplished in your career and take time to enjoy the small things in life. We are strong believers in the importance of finding purpose and staying active in retirement. That being said, some retirees might be caught off guard by the cost of these new hobbies and activities. Because retirees are on a fixed income, it’s important to plan for these expenses in detail, so they don’t crop up unexpectedly.

How to Deal With Unexpected Expenses in Retirement

Of course, this is just a shortlist of the many unexpected expenses that can arise during retirement. There’s an unlimited number of other random expenses that can occur that no one can predict. Luckily, you can help protect your retirement income by anticipating the unexpected. As you plan your retirement, consider:

  • Aligning your retirement plan with your goals
  • Setting aside an emergency fund for unforeseen expenses
  • Leaving extra room in the annual budget to give you wiggle room
  • Saving extra during your working years
  • Timing your withdrawals to reduce your overall tax bill
  • Ensuring that your investments align with your risk tolerance

For us, we think retirement planning is an exciting process.  We understand it requires detailed planning to anticipate both the expected and unexpected expenses. While planning for retirement can seem overwhelming for some, it can help you prepare and whether those financial bumps that will inevitably come along.  If you need help or a second opinion, we’d be happy to chat.  

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