6 Unexpected Retirement Expenses and How to Handle Them

After years of planning and saving, you might feel fully prepared for retirement. However, just like any other stage of life, unexpected or unwelcome expenses can arise. Whether it’s a major home repair or a large medical bill, being prepared is crucial to ensure these surprises don’t derail your golden years.

By planning, you’ll be more able to take on the obstacles life throws your way. In this article, we’ll explore the types of unexpected expenses that can arise after retirement and outline strategies to help minimize their impact. You’ll also learn how a professional can be an invaluable resource for post-retirement expenses, even if you think you have all of your bases covered.

1. Healthcare and Medical Bills

One of the most common and, in many cases, underestimated expenses after you retire is the cost of healthcare. For most people, their pre-retirement careers covered their health insurance for the bulk of their life. However, once you stop working, the burden falls on you to either pay for healthcare or shoulder the entire burden of medical expenses.

Additionally, as you age, you’ll likely end up paying more for healthcare than earlier in life. This is, in large part, due to increased health risks, as well as inflation. According to the Consumer Price Index (CPI) for Medical Care, the average cost of healthcare services has risen from about $485.03 in September 2018 to $565.98 in September 2024. The cost of prescription drugs can also be high and, in many cases, susceptible to inflation.

Moreover, sudden medical crises, such as a heart attack, chronic illness diagnosis, or severe injury, can be quite a large expense. Even if you have health insurance, you may have to pay a substantial amount out of pocket.

Here are a few ways you can prepare for rising health costs when you retire:

• Fill coverage gaps. While you become eligible for Medicare at 65, it doesn’t cover everything. Services such as dental, vision, and long-term care typically aren’t included. It’s wise to consider your health needs and determine whether you should add supplemental coverage, which some refer to as Medigap, to cover them.
• Save and invest in a Health Savings Account (HSA). One way you can prepare for unexpected costs now is by opening an HSA and contributing often. These accounts allow you to invest your funds and grow your deposits over time with compound interest.
• Consider Medicare’s prescription drug program. The cost of prescription drugs can add up fast. It may be a good idea to sign up for Medicare’s optional program that covers various drug types.

2. Home Repairs

While it’s common for people to downsize or move to a new home after retiring, many also remain in the same house they’ve been in for years. With more time on your hands, there may be projects or maintenance you want to accomplish, such as new floors, countertops, or replacing appliances. These improvements, however, can quickly add up and cost thousands of dollars.

Whether you’re still working toward retirement or have already done so, be sure you’ve built up an emergency fund for such large expenses. It’s also a good idea to keep your home in good shape throughout your life, such as by getting an inspection to ensure everything is still up to code. It may also make sense to downsize so that you don’t have as much upkeep to handle.

3. Long-Term Care and Assisted Living

According to the U.S. Department of Health and Human Services (HHS), 70% of Americans who reach the age of 65 will require long-term care at some point in their life. Unfortunately, this can be a heavy financial burden on families for many years. For example, the median cost for an assisted living facility was $5,350 per month in 2023, according to a survey by Genworth.

Because of the high costs of long-term care, it’s crucial to plan for them well before it’s time to pay. If you believe you will need such care at some point, you have two options – either pay out of pocket or seek long-term care insurance. In exchange for paying consistent premiums, having this coverage can shield you from hundreds of thousands in ongoing costs.

4. Family Financial Support

Even in retirement, you might find yourself needing to take care of somebody. Your children may move back in, a parent may need care or assistance, or grandchildren may come into the fold. Whatever the case, planning for such expenses is important to ensure your financial health stays on track.

First, it’s always a good idea to have an emergency fund built up and available to cover any unexpected expenses. However, it may also be worthwhile to discuss with any new residents, even if family, about helping out financially. This could mean them paying you rent or covering the cost of groceries, for instance.

When it comes to grandchildren, you may want to spoil them or even help plan for their college education down the road. One way you can help with the latter is by establishing a 529 plan or UGMA/UTMA for them. This allows you to contribute money toward either their tuition or, in the case of UGMA/UTMAs, any expense they might have in adulthood.

5. Losing a Spouse

As you age, losing the ones you love becomes more of a possibility than ever before. If you’re married, the loss of a spouse can be both a devastating emotional and financial experience. While it’s hard to mitigate what you might be feeling at the time, you can still take steps to put either you or a spouse in a better position if something were to happen.

Alex Schlesinger, a licensed insurance professional and the founder and CEO of Active Mutual recommends “proactive financial planning, including life insurance and securing spousal benefits” to be prepared for whatever happens. Life insurance pays out a significant amount in the event of a death, which can help you stay afloat. Additionally, checking on a pension’s survivorship rules and ensuring either you or your spouse claim the other’s Social Security benefits can make a difference.

It’s also important to meet with a financial advisor and an attorney to create an estate plan. This helps remove any questions about what one’s wishes are so that the process of transferring assets is as smooth as can be.

6. Market Losses and Volatility

If you’ve been saving and investing for retirement, you’ve likely been in long term wealth-building mode. However, once you retire, your investment objectives typically shift to preserving your capital. While the markets tend to produce positive returns over long periods, a sudden drop in the short term could significantly reduce your portfolio’s value.

Because of market risks, it’s a good idea to meet with a financial advisor to discuss a portfolio strategy that shields your investments from losses. This typically means a change to your asset allocation that reflects a more conservative approach. For instance, you may focus less on growth securities and more on fixed-income ones, such as:

• Treasury bills
• Bonds
• Certificates of deposit (CDs)
• Money market funds

How a Financial Advisor Can Help

Retirement, while exciting, can bring uncertainty and surprise obstacles. While you may be able to handle much of it on your own, it’s a good idea to have a financial advisor in your corner. They can help you determine the most optimal paths to tackle challenges that may come your way, as well as keep you on track toward your goals.

More specifically, a financial advisor may be able to guide you toward a budget that allows you to have an emergency fund once you retire. Additionally, they can help you save and invest properly throughout your life in crucial accounts, such as a Roth IRA or HSA. They can also assist you with making strategic and tax-efficient withdrawals from those accounts once you retire.

If you’re considering hiring a financial advisor, we recommend you use this free matching tool. Once you fill out a brief quiz regarding your goals and current situation, it’ll present you with a high-quality vetted option in your area.