5 Crucial Expenses That Are Unpredictable in Retirement — and How To Prepare
Written by
Adam Palasciano
Edited by
Nicholas Morine
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Retirement should be a time of rest, relaxation, and enjoyment. Ideally, you worked hard for decades and saved up a sufficient nest egg to provide financial security for the rest of your life.
According to Federal Reserve data as of 2022, 54.4% of families have retirement accounts — the average retirement savings for a family in the U.S. is approximately $333,940.
While this might seem like a healthy sum, it is possible to run into some unpredictable retirement expenses during your golden years, all of which could render a serious blow to your retirement savings.
Here are five crucial expenses that are unpredictable in retirement and how you can prepare for them, according to Charles Schwab.
Taking Care of an Adult Child in Crisis
Perhaps you’ve raised your children and they left the nest ready to take on the next chapter of adult life. However, sometimes adult children might face financial crisis for a number of reasons. It can be the result of a job loss, a divorce or a long-term disability, for example. A parent might feel a natural instinct to help their child, even though they’re now an adult. But, providing financial help to your adult children for whatever reason can potentially put your retirement savings at risk. Consider limiting your financial support, or setting strict limits on the amount of money and length of time you’ll be able to help.
Home Repairs and Other Housing Costs
If you’re retired and you’ve already paid off your mortgage, kudos to you. However, there are long-term expenses associated with homeownership that don’t disappear even when you’re retired. Rising property taxes, maintenance fees, the cost of utilities and unexpected home repairs can all take a bite out of your retirement savings. Be sure to set aside extra funds for unexpected home costs before entering your golden years.
Uncovered Healthcare Expenses
If you’re over the age of 65, then you’ll qualify for Medicare. While Medicare covers some healthcare expenses, it does not cover everything. Paying for supplemental insurance, such as Medicare Part D or private Medigap insurance, comes at a premium — but could be a wise decision. Additional coverage could save you a bundle if you have a surprise medical expense that Medicare does not cover.
Long-Term Care
As you age, the probability that you may eventually need some form of long-term care increases. This type of care can range from an at-home aide who visits your home several times a week to living full-time in a nursing home. In many cases, the cost of long-term care must be covered out of pocket or with long-term term care insurance. For wealthier individuals, paying out of pocket might be the right move. For those in the middle class or below, long-term care insurance is likely a smart idea. You might be paying for insurance that you never have to use, but it could save you a huge amount of money in case long-term care becomes necessary.
Loss of a Spouse
The loss of a spouse can be devastating, both emotionally and financially. This can be particularly true if the deceased spouse is the breadwinner of the family. Some ways to lessen the financial blow of a spouse’s passing are to purchase a long-term life insurance policy in advance, ensure that you’ll have rights to your spouse’s pension once they’re deceased, and delay collecting Social Security for the highest earning spouses as long as possible. Surviving spouses are eligible to collect the deceased spouse’s Social Security after their passing. If you delay collecting the higher-earning spouse’s Social Security benefit as long as possible (up to age 70), you’ll ensure the highest monthly benefit for life for either spouse.
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