4 Surprising Retirement Expenses Most People Forget To Budget For
Written by
Jamela Adam
Edited by
Levi Leidy
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Many people plan for basics like housing and travel expenses in retirement, but they often forget about a few less obvious costs that are just as important.
Here are four retirement expenses you’ll want to factor into your budget so they don’t derail your financial plans later.
Healthcare Costs
Once you retire, you’ll still be responsible for premiums, deductibles, co-pays and services that Medicare doesn’t fully cover, like dental, vision and hearing. And if you need long-term care or extended rehabilitation after a surgery or illness, that typically isn’t covered either. According to the Federal Long Term Care Insurance Program, the national average cost for a semi-private room in a nursing home is $100,740 per year. If you want a private room, expect to pay even more than that.
And according to Fidelity’s latest Retiree Healthcare Cost Estimate, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 in healthcare and medical expenses throughout retirement, a more than 4% increase compared to last year. That figure doesn’t even include potential long-term care expenses we just mentioned above.
So, if you haven’t already, start building a dedicated healthcare savings account into your retirement plan, and consider opening and funding a health savings account (HSA) if you qualify. An HSA is a tax-advantaged savings account designed to help you save for qualified medical expenses.
Home Repairs and Maintenance
Even if you own your home outright, property costs don’t disappear once you retire from the workforce. You’ll still need to budget for property taxes, homeowners insurance, utilities and routine maintenance.
A common rule of thumb is to set aside 1% to 4% of your home’s value per year for repairs and maintenance. So if your home is worth $400,000, you’ll want to budget around $4,000 to $16,000 annually. If home repair costs become too overwhelming, consider downsizing to a smaller property that won’t cost you as much money to maintain.
Emergency Expenses
No matter what age you are, you need an emergency fund to help you cover unexpected expenses like a major car repair or a medical emergency. Without one, unplanned expenses can easily derail your retirement budget.
Make sure to keep a dedicated emergency fund with three to six months’ worth of living expenses, even after you retire. If you expect to spend around $2,000 a month in retirement, have around $6,000 to $12,000 parked in a high-yield savings account so it can earn interest and not be eaten away by inflation.
Inflation
Speaking of inflation, it also doesn’t stop when you retire. Inflation is the rate at which the general price level of goods and services rises, which leads to a fall in the purchasing power of money. For example, if a bottle of water cost $1 a year ago and now costs $1.03, the price has increased by 3%.
To make sure inflation doesn’t chip away at the value of your assets, keep a portion of your portfolio invested in assets that have the potential to outpace inflation, like stocks or inflation-protected securities. You’ll also want to revisit your budget annually and make adjustments as prices change.
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