Planning for retirement often includes creating an estimated budget for housing, living expenses, and other costs like travel or hobbies. However, there are many expenses that people fail to include in their calculations.
In some cases, people may not anticipate cost increases or how leaving the working world changes how some expenses are calculated. Omitting these costs from a retirement plan can put individuals in financially precarious situations. For this reason, financial advisors suggest their clients research the often forgotten expenses and include space for these costs in their planning.
Healthcare is one of the biggest sources of unexpected costs in retirement. While many other expenses in life decrease with age, health care costs tend to go up. While many seniors qualify for low or no-cost care through Medicare, there are some expenses that this government program will not cover.
For example, oral and vision care is not included under basic Medicare. Retirees must supplement their coverage with a private plan through the Part C Medicare Advantage program to access routine eye and dental exams.
Even with this additional insurance, the costs for equipment like hearing aids are not covered in full. In these cases, retirees should also have a cushion set aside for out-of-pocket insurance costs. If individuals can afford the premiums, a Medigap insurance policy can mitigate some uncovered healthcare costs.
Long-term care is another health-related expense that can be costly if not planned for. Seven out of 10 seniors will require long-term care at some point in their retirement. This includes the cost of around-the-clock assistance, and in some cases, outpatient medical care.
If a family member cannot provide this care, hiring a home health aid can cost thousands of dollars per month. Individuals can protect themselves by purchasing long-term care insurance. Since the premiums for these policies are higher for older people, it is best to start a policy before reaching 65 years of age.
Family changes can also cause unexpected changes to an individual’s retirement plan. For example, grandparents may gain custody of their grandchildren due to illness or other circumstances. Further, adult children may encounter a financial crisis and need help from their retired parents.
Experts advise retirees to set aside a pool of savings to pay for gifts and financial support for their children and grandchildren. If this is not possible, families should set strict boundaries on financial expectations.
While most homeowners are aware of the ongoing maintenance costs and plan for this in their retirement budget, many people do not anticipate the cost of retrofitting a home to accommodate aging residents. Retirees may need to pay for structural changes to the house, such as widening doorways or building a bedroom on the lower floor, to remain in their home.
Changes in homebuilding standards can also add unexpected costs. Homeowners should get a thorough inspection of their home a few years before retirement to assess if the property is still up to code. If not, they will need to incorporate the costs of any mandatory updates into their retirement budget.
