Commonly Overlooked Retirement Expenses

by Reader Contributors

Oftn Overlooked Retirement Expenses photo

Will you encounter expenses in retirement that you didn’t think to include in your planning? Most retirees do. Make sure you are as prepared as you possibly can by making a point to include these commonly overlooked retirement expenses.

Dear Gary,
If all goes as planned, I am about three years away from retirement and I want to make sure when my retirement time comes I am budgeting as best I can for what my monthly/yearly expenses will be and not just for my early retirement years but my later years as well.

I am sure I am overlooking some retirement expenses. I’d like to hear from those who have already retired what unexpected costs they have encountered that they did not think to plan for.

You know what they say about best-laid plans, or in this case retirement plans! I just want to make sure I am as prepared as I can be, so I can avoid too much of the unexpected when it comes to my future living expenses.

Health Insurance Is a Big Retirement Expense

When we retired, our health insurance went up quite a bit. My husband was two months past his 65th birthday, so the increase was about $125 per month. I was 62, so my insurance went from about $400 per month to $727 per month!

This is Montana, so check things out in your state. Enjoy your retirement.
Tia in Montana

Plan for the Cost of Retirement Home Upkeep

This is just something that we are now dealing with in our retirement. We want to downsize from a large two-story home to a small retirement village where all the yard work will be done. We will barely be able to afford this drastic move.

Do you know why? We haven’t wanted or been able to afford all the upkeep of a large home. It now needs expensive updates, including a new roof, paint inside and out, new flooring, and the list goes on. We should have done more when we had income to do it. Now people want to buy it, but at a low price.

I never knew it would be this hard to a get a decent, affordable place in retirement. There is also not much to pick from in our city.

Do Not Take on Debt!

I’ve been retired for a long time and can’t think of any expenses that have come up that were unplanned for, but I do have one piece of advice.

Absolutely do not take on debt.

I retired debt free and then took on a mortgage on a second home and a car loan. Then 2008 hit. My income from savings was reduced by 75%, and that was my entire income at the time. I would have gotten through that without all the terror I felt if I didn’t have to make those debt payments.

Will Debt Derail Your Retirement?

One of the most important ingredients for a comfortable retirement is to be debt free when you retire. This simple checklist can help you find out if debt could derail your retirement.

Consider House Expenses

For some reason, we hadn’t planned on having to have our driveway plowed, grass cut, or leaves raked. Many of the home upkeep and repair jobs that my husband used to do around the house must now be done by professionals.

We’ve compared costs, however, and for the present, it makes sense for us to live at home with these added expenses rather than move somewhere with a $300/month service fee.
Darlene in CT

Plan for Medical Expenses and Prescription Costs in Retirement

The biggest expenses we have are our medical bills. Co-payments and prescriptions kill us. We have Medicare with no private insurance, and being diabetic medications is very expensive. My meds are more than my Social Security. Luckily, I have a pension, as does my husband.

It is sad that my husband worked for a union for 50 years, and when he became 62, all medical insurance ceased. It was 62 because he was on Social Security Disability and qualified for Medicare at 62. We were healthy at the time of retirement, but as you get older, you get problems.

Expect the Unexpected

My husband paid all the bills, but when he passed away, I had to learn how to budget. It is similar to retiring and learning to get by on your income. (See 5 Financial Steps You Should Take When a Spouse Dies.)

In my case, the house was paid off, so my monthly expenses were mostly healthcare, utilities, food, gas (and car upkeep), and cable/internet/phone. Then my vehicle insurance bills would come every six months and homeowners insurance once a year. My property tax that includes irrigation can be paid bi-yearly. I use my Costco credit card and a Discover card for other purchases. Both pay cashback and I pay them off each billing.

Another big expense is yardwork. My husband was the one who did all that. I know very little about yardwork and it costs me over $500 a year for mowing and leaf cleanup. I have to occasionally hire tree trimmers to prune the big trees so limbs do not fall on my house in a windstorm. That can cost a lot.

The unexpected expenses that I have had so far include replacing almost every appliance in the house over the past four years. The appliances just happened to all die or have something wrong that wasn’t easily fixed. I also hired someone to paint my eaves for about $2,000. Then I needed a new false tooth, which turned out to be about a $10,000 problem. To get one that looked right, I first had to go through a year of braces and then an implant. I have no dental insurance. Any dental work comes out of my pocket.

This past year, my regular income just about equaled my expenses. I have an investment portfolio that for now reinvests the interest and dividends, but I plan to have some of that pay out as extra income to supplement my pension and Social Security. The bigger your investment portfolio, the more income you can generate. I haven’t needed that extra income just yet. Knowing I can have it helps me to feel I am not barely getting by. Good luck to you.
Linda in Tri-Cities, WA

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What Shape Are Your Appliances In?

Take a good look at your major appliances (washer, refrigerator, etc.) and replace them if needed prior to retirement. Absorb the replacement cost while you are still working rather than later when your income may be less and you would possibly have to dip into savings.
Lou Ann

A Retirement Expense Trial Run

One way to be sure you can survive on Social Security is to discover how much your check will be when you actually retire. Then set aside that much money from your monthly pay and try to live on only that money. You will soon discover what you can and can’t afford.

You may decide that you need to wait until a later retirement date, so your monthly check will be larger. Or, you may find that you can live quite well on your three-year goal retirement check. Please be sure to be able to adjust for some inflation over the years.

Live on “Retirement Pay” Before Retirement

Several years before retirement, my husband and I made an all-out effort to pay off all debt, including our mortgage.

We kept close watch on our spending habits and expenses. We listed all recurring expenses like property taxes, homeowner insurance, auto insurance, medical premiums, pest control services, etc. and divided the yearly cost by 12 to budget for monthly cost. We opened a separate bank account to deposit the money to these funds each month. (See Reduce Your Debt With a “Sinking Fund”.)

We also took the plunge to make a car fund payment, so when the time came that we would need to buy another car, we would have the money to pay cash. (See How To Never Have Another Car Payment.)

We also created other miscellaneous funds like a gift fund (lots of grandchildren), dental, car repair and maintenance, clothing allowance, and Christmas/holiday expenses.

Once we had everything on paper and knew our current and anticipated expenses, we began to live on our “retirement pay” before we retired as opposed to our employment pay. The budgeting process took several months, but it was well worth the time. Living on our “retirement pay” while still working allowed us to save an additional nest egg.

Crowns, Cavities, and Root Canals… Oh My!

Have dental insurance and take good care of your teeth. In the years leading up to retirement, have your dentist do preventive fixes. Keep a small pot of money for tooth, eye, and hearing care.

Don’t Miss the Boat

When you’re packing for a trip, you nearly always manage to leave something important behind at home no matter how well prepared you are. The same can be said for retirement planning, but the consequences are much more severe. Don’t fret, though. We’re here to help with a list of commonly overlooked expenses, so you don’t miss the boat.

Medical costs: It would be great if Medicare covered everything, but it won’t cover all health care costs. You’ll still need to allot funds for expenses like dental and vision care, as well as prescription medications and long term care. Your supplemental insurance may help with these, but do some investigating to find out what will likely be covered and what won’t be covered. This will help you prepare for any out-of-pocket costs that arise.

Helping family members: Even if your parents were smart savers and meticulous planners, they may still have worries about their own retirement needs, especially if a serious injury or illness occurs. In such a case, they may look to you for help covering health care costs.

And if having them (eventually) move into your home is a real possibility, you’ll need to plan for the expenses required for home modifications like ramps and railings.

Likewise, your adult children and/or grandchildren may also need financial assistance for expected expenses like college tuition, as well as unforeseen financial bumps in the road like a job loss, divorce, or illness.

Unexpected tax expenses: It doesn’t matter if you’ve been filing taxes for your entire adult life. Taxes in retirement can be a whole different ballgame. Since there’s no way to know what code changes may be coming down the pike, keeping your retirement funds diversified (with both pretax and post-tax retirement accounts in the mix) can help.

And bear in mind that your Social Security benefits can be taxable, as are pre-tax 401(k)s and traditional IRAs once you begin withdrawing from them.

New hobbies: When you’re buried in work, it’s hard to imagine a future in which you will have all the leisure time you can handle. But it will come, and it likely won’t come cheap. Even if you don’t plan on becoming a world traveler, other hobbies can add up too. Golf, scuba diving, wine tasting, and fishing all have their associated costs.

Even small lifestyle changes like going to the movies and eating out more can put a dent in your retirement savings, which means they need to be figured into your plan. (See Budgeting for Travel as Part of Retirement Planning.)

Home and auto expenses: Nothing lasts forever, and your retirement won’t go far either if you haven’t accounted for “hidden” repair costs. Sure, you may already know that your car can likely make it another 100,000 miles and that your home’s roof will need to be replaced in a few years. But the smaller repairs and replacements (everything from the hot-water heater or your car’s AC to auto license and tag renewal fees) can nickel and dime you into trouble if you don’t plan for them.

Also, think about what services you may need as you get older that you don’t necessarily need now, such as lawn care, snow removal, or help with housekeeping. Factor those into your retirement planning as well.

Reviewed May 2023

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