The Hidden Costs of Retirement That Catch Most Middle-Class Americans Off Guard
Written by
Cara Danielle Brown
Edited by
Zuri Anderson
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According to SmartAsset, it takes between $49,500 and $148,500 to be considered middle class in America. For some, this is just barely enough to save for retirement. And it’s even less once retirees come face-to-face with costs they hadn’t anticipated.
Here are five hidden costs of retirement that catch most middle-class Americans off guard.
Medicare Part B
As Lisa A. Cummings, Esq., retirement and benefits attorney at Cummings & Cummings Law, has seen, several costs routinely surprise middle-class families. Namely, Medicare Part B — an optional add-on –which covers outpatient visits and preventative healthcare. Part A primarily covers hospital and inpatient care.
“Medicare Part B will cost at least $185 per month and may be even greater if the retiree had higher income in the years just before retirement,” stated Cummings.
Plus, if retirees don’t enroll and aren’t covered elsewhere by an employer plan, they may be subject to an additional 20% late enrollment penalty.
Long-Term Care
Cummings stated that long-term care is, by far, the largest hidden cost accelerating portfolio withdrawals. Many are surprised to learn that long-term care is not covered by Medicare.
Steve Sexton, retirement planning expert at Sexton Advisory Group, stated, “On average, in-home care in 2025 costs about $78,000 annually, assisted living facilities cost about $80,000 annually and nursing homes with semi-private rooms cost $111,000 annually.”
As a result, individuals may consider securing long-term care insurance policies. Unfortunately, if people have waited until age 60 to purchase one of these policies, they are often more expensive.
The National Council on Aging estimated that, as of 2024, a $165,000 benefit policy with no inflation protection costs $1,200 per month for a single male, $1,900 per month for a single female and $2,600 per month for couples.
Additional Healthcare Costs Not Covered by Medicare
Some retirees are surprised to learn how many healthcare costs are not covered by Medicare. Cummings estimated that retirees can expect to pay up to $170,000 over the course of their retirement in uninsured healthcare costs. Neither dental, vision nor hearing is covered by Medicare. And certain prescription drugs — especially newer ones — may not be covered either.
Some retirees choose to purchase an additional Medigap Policy: A private insurance policy which covers many out-of-pocket expenses. Medigap premiums can range from roughly $50 to $300 per month, and retirees must be enrolled in both Medicare Part A and Part B in order to purchase the supplemental insurance.
Taxes
Taxes are often stealth expenses in retirement. Chad Gammon, certified financial planner (CFP) and owner at Custom Fit Financial, explained that many aren’t prepared for social security payments and withdrawals from their 401(k) plans and IRAs to be taxed.
“Many are also unaware that, once they reach their 70’s, they’ll be subject to Required Minimum Distributions (RMDs),” stated Gammon. “These RMDs can unexpectedly push them into a higher tax bracket than they were in while working, especially if they have other sources of income like pensions or Social Security.”
Miscalculating Longevity
While a long life is typically seen as a good thing, miscalculating just how long will quite literally cost you. Sexton stated that living longer than expected can be one of the biggest hidden costs in retirement as healthcare and housing costs continue to accumulate.
Additionally, retirees may have begun taking Social Security payments earlier than advisable. When it comes to life expectancy, try to plan for the best-case — and most expensive — scenario.
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