Most people enter retirement with a pretty good idea of what their major expenses will be. We anticipate things like housing, healthcare, and everyday living expenses.
But retirement rarely follows a perfectly predictable budget. Some of the expenses that can have the biggest impact are the easiest to overlook. Here are a few worth planning for.
Your House Still Needs Work
Paying off a mortgage can dramatically reduce your monthly expenses, but it doesn’t eliminate the cost of owning a home. Over the course of retirement, you’ll likely face everything from routine maintenance and appliance replacements to larger expenses like a new roof, HVAC system, or driveway. You may also find that a home that worked perfectly at 55 needs modifications to remain comfortable and accessible at 75.
Helping Your Children Doesn’t Always End
Many parents assume their financial responsibility for their children will decline once the kids are established. Sometimes it does. But retirement can coincide with the years when adult children are buying homes, raising families and facing significant expenses of their own.
You may want to help with a down payment, contribute toward a grandchild’s education or step in when an unexpected need arises. There’s nothing wrong with being generous. The key is understanding how much you can give without compromising your own plans.
Travel Can Become a Bigger Line Item
Retirement can mean more trips, longer trips and greater flexibility to travel with family and friends. A travel budget that seemed generous before retirement can quickly grow when you’re taking several significant trips each year. And once you’ve gotten accustomed to a certain style of travel, it’s not always easy to scale it back.
Insurance Costs Continue to Rise
Insurance needs don’t disappear in retirement, and the cost of coverage can change considerably over time. Homeowners and auto premiums may continue to rise, while healthcare coverage can become a larger part of the budget. Medicare helps with healthcare costs after 65, but premiums, supplemental coverage and out-of-pocket expenses still need to be factored in. Rather than assuming today’s insurance costs will continue indefinitely, it’s important to plan for how both your coverage and costs may evolve throughout retirement.
Healthcare Isn’t Just About Premiums
Healthcare is one of the most discussed retirement expenses, but even careful planners can underestimate how much costs can increase later in life. Dental work, hearing aids, vision care, prescriptions and other out-of-pocket expenses can all add up. An even larger consideration is the possibility of needing assisted living or other forms of ongoing care. These costs can be substantial and may continue for years, making the later stages of retirement considerably more expensive than anticipated.
Everything Eventually Needs Replacing
Over a 25- or 30-year retirement, many of the things you rely on today will eventually need to be replaced. Cars, appliances, furniture, computers and phones all have limited lifespans, and you may also decide to tackle larger projects such as renovating a kitchen or updating your home.
These purchases may not show up in your regular monthly expenses, but they’re a normal part of life. A good retirement plan should leave room for these occasional larger costs rather than focusing only on predictable day-to-day spending.
Build Flexibility Into the Plan
The goal isn’t to anticipate every expense you’ll encounter over the next several decades. That’s impossible. Instead, build enough flexibility into your retirement plan that an unexpected $15,000 expense doesn’t feel overly stressful.
Retirement tends to be more expensive in some years and less expensive in others. A strong financial plan recognizes that reality and gives you room to enjoy your money, help the people you care about and handle life’s surprises along the way.