5 Expenses Most Retirees Still Underestimate in 2026 That Could Cost Them Thousands
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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When retirement begins, the budget often looks manageable. The mortgage may be gone, income is predictable and big splurges are behind you. Then a few years pass, costs creep up in unexpected places and the plan that once felt solid starts to feel tighter than anticipated.
Retirement and financial experts explained the expenses retirees most often underestimate, even in 2026, and what you can do about it.
1. Healthcare Costs That Rise Faster Than Inflation
For people who work a traditional career, healthcare is often one of the most underestimated categories because costs rise unevenly over time. Many retirees fail to adequately plan for it, according to James Hargrave, CFP and founder at Pillar Financial Planning. Medicare lowers expenses initially, but premiums, prescriptions, IRMAA (income-related monthly adjustment amount) surcharges and out-of-pocket costs increase later.
“Clients are often shocked to learn that a 65-year-old couple retiring today may need over $172,000 to cover lifetime medical expenses, not including long-term care,” added Josh Katz, CPA and founder at Universal Tax Professionals.
2. Long-Term Care and In-Home Assistance
In the healthcare vein, long-term care costs can be a financially destabilizing surprise. Medicare doesn’t cover custodial care, and even part-time in-home help can run thousands per month.
Jehan Crump Gibson, a trusts and estate litigation attorney and co-founder and managing partner at Great Lakes Legal Group, pointed out that people plan for retirement “but not for aging.” She added that there’s an assumption of “independence lasting longer than it often does.” Some retirees may even expect family members to fill care gaps without accounting for the financial strain, and then find themselves in a financial pinch when it’s time for care.
3. Housing Costs Beyond the Mortgage
Owning a home outright in retirement doesn’t always equal low housing costs, either. Property taxes, insurance and regular maintenance remain ongoing costs. Katz also pointed out that any modifications needed to be made for accessibility can be steep.
Gibson added that health and housing costs can actually “compound each other because a health issue often triggers housing changes and caregiving needs simultaneously.”
4. Insurance Premiums That Quietly Escalate
Retirees may have budgeted for their auto and home insurance premiums as a flat line item when they are actually rising faster than other bills. In fact, Katz said, these premiums are “increasing at double the rate of general inflation.”
Home insurance rates alone have surged by over 11% annually in recent years, he pointed out, and “auto insurance has risen at double or triple the overall inflation rate.”
5. Legal, Administrative and Incapacity-Related Costs
In addition to more traditional costs, there are some that retirees rarely budget for because they’re caught off guard by the need for them, Gibson said. “Long-term care, in-home assistance, legal and administrative costs tied to incapacity and housing-related expenses beyond the mortgage are the most common surprises,” she said.
Lack of early planning increases family conflict and litigation risk, so retirees should think ahead to consider these costs.
When These Costs Hit — Early vs. Late Retirement
These costs may not hit all at once in retirement. Lifestyle expenses often peak early, making it easier to budget for those, while healthcare, caregiving and housing modifications spike later, often after age 80, Katz explained.
“The most severe and costly surprises typically accumulate and intensify in the later stages of retirement.”
Underestimation in general tends to stem from “planning with today’s dollars and not fully accounting for decades of future inflation,” Katz said. People have a cognitive bias toward hoping for the best, which leads to inadequate planning, he warned.
How Retirees Can Budget More Realistically for 2026
Retirees can budget more effectively by stress testing budgets with higher healthcare/medical inflation factored in. Always assume that you’ll eventually require some level of paid care. Try using online modeling tools or calculators to help you plan with real data.
Most importantly, understand that it’s more important to be flexible than perfect in your planning. The retirees who fare best in 2026 won’t be the ones who guessed at a specific number, but the ones who planned for change.
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