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6 Surprise Retirement Expenses and How to Prepare for Them

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Tips to Help You Plan for the Unexpected

Retirement is a long-awaited milestone that allows you the freedom to enjoy life without the worries and stress of work. However, a surprise retirement expense can quickly derail your retirement dreams. Don’t get caught off guard by the following unexpected retirement expenses.

#1 – Healthcare and medical expenses

Healthcare is one of the most significant expenses faced by many retirees. Many people find that their healthcare and medical expenses increase as they age, and while Medicare covers some expenses, it likely won’t pay for everything. Costs related to prescription medications, dental and vision care, and long-term care can quickly add up.

To prepare for healthcare expenses in retirement:

  • Estimate your healthcare needs – Consider your medical history, family health issues and any lifestyle factors that may impact your future healthcare costs.
  • Research your health insurance options – Understand the Medicare plans and supplemental insurance policies available to you and select a combination of coverage to meet your specific needs.
  • Establish an emergency healthcare fund – Set aside funds specifically for unexpected medical expenses. A tax-efficient way to save during your working years is through a health savings account (HSA).

#2 – Home repairs and maintenance

If you’re like many retirees, you’ll spend more time at home once you’ve left the workforce, which means it’s important to ensure your house remains safe and comfortable. However, unexpected repairs and home maintenance can put a dent in your retirement savings. Expenses related to roof repairs, plumbing issues and HVAC system failures can be especially costly.

To prepare for home expenses in retirement:

  • Regularly maintain your home – On a regular basis, conduct a thorough inspection of your home and its systems in order to quickly identify and address any minor issues before they become major expenses.
  • Establish a home repair fund – Similar to your emergency healthcare fund, set aside funds in a designated account to pay for unexpected home repairs without derailing your other retirement plans.
  • Consider downsizing – Moving to a smaller, more manageable home can help reduce both the costs and responsibilities of homeownership.

#3 – Supporting adult children or aging parents

An unexpected event in the life your child or the need to care for an aging parent may require you to provide financial support for a period of time. These unexpected family obligations can put a strain on your retirement finances if not properly planned for in advance.

To prepare for family support expenses in retirement:

  • Encourage financial independence –Teach your children how to manage their money, stick to a budget and become financially self-sufficient.
  • Establish boundaries – Discuss your financial expectations with your children and establish limits on the amount of support you can provide.

#4 – Travel and hobbies

Retirement should be a fun and active time of life. It’s an opportunity to explore the world and pursue new hobbies and interests. However, it’s important to ensure you have enough saved to cover these expenses. Fluctuating travel prices, currency exchange rates and unforeseen expenses during your travels can significantly impact your ability to live out your dreams.

To prepare for travel and leisure expenses:

  • Research and plan ahead – Establish a budget for any anticipated trips that includes potential costs such as transportation, accommodations, meals and activities.
  • Consider travel insurance – Travel insurance can help protect your finances from unexpected expenses such as cancellations, medical emergencies and lost luggage.
  • Leave room in your budget – Maintain enough flexibility in your travel budget to cover spontaneous trips and other opportunities to participate in leisure activities.

#5 – Grandchildren

Grandchildren can add welcomed expenses to your retirement. If the possibility of grandchildren is in your future, you may want to set aside extra funds to spoil them, help with the cost of college education or travel to see them.

To financially prepare for grandchildren:

  • Budget for travel expenses – If your grandchildren live far away, you may wish to visit them often. Plan for additional airline and accommodation expenses so that you can make the trips.
  • Establish a 529 savings account – If your goals included helping to pay for your grandchildren’s college expenses, the best time to start saving is now. 529 savings plans provide a great opportunity to set aside funds in a tax-efficient manner.

#6 – Loss of a spouse

While none of us want to consider the possibility of losing a spouse, it’s a reality faced by many retirees. Final expenses, such as medical bills and funerals costs, can quickly add up. To add to the stress of the situation, you may also lose some of your spouse’s Social Security or pension income.

To prepare for a spouse’s death:

  • Consider life insurance – A lump sum insurance payout can help pay for final expenses and offset the loss of your spouse’s Social Security or pension income.
  • Research survivor benefits – If your spouse receives pension payments, consider opting for survivor benefits before you retire. Your wealth advisor can help you determine what makes the most sense for your particular situation.
  • Plan for Social Security – As you and your spouse are making Social Security decisions, consider the possibility that one of you may unexpectedly pass away sooner than expected. With this in mind, it may make sense to delay one spouse’s benefits.

Could you use some help planning for unexpected retirement expenses? Creative Planning is here for you. We serve as a partner in helping clients plan for retirement. Our goal is to provide you with the confidence of knowing you’re on track to achieve your retirement goals. To do so, we integrate the various aspects of your financial life into a comprehensive financial plan specifically designed to help you retire with confidence. To learn more, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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