Unexpected retirement expenses

January 21, 2022

When planning for your retirement, it’s wise to expect the unexpected. Careful planning can help you overcome potential financial hurdles and make the unexpected more manageable.

 

In retirement, unexpected medical bills or even cost-of-living expenses can be a surprise. Here are five expenses that may disrupt your plan and ways you can better prepare for them.

 

1. Inflation rate increases


Consider an average annual inflation rate of 3%. At that rate, $50,000 today would be worth just $23,880 in 25 years, due to diminished purchasing power.

How to prepare: Diversify your investments

Account for inflation as you plan your retirement income. Additionally, diversifying your portfolio with exposure to U.S. stocks, bonds and real assets such as commodities may help you shield your money against inflation. However, diversification and asset allocation do not protect against losses or guarantee returns.

Read more about how inflation can affect your investments.

 

2. Underestimating your needs


A person 65 years or older spends an average of $48,872 a year.1 Underestimating your retirement living expenses may make surprise expenses harder to deal with.

How to prepare: Plan your essential and discretionary expenses

Estimate your expenses as realistically as possible. Start with essential expenses (housing, taxes, utilities, groceries and insurance) followed by your discretionary expenses wishes (travel, hobbies or entertainment).

Read 4 steps to take when planning your retirement income.

 

3. Medical bills


It’s projected that healthcare spending will rise 5.4% on average from 2019 to 2028.2 As we age and our health declines, healthcare costs become more significant.

How to prepare: Consider a Health Savings Account

A Health Savings Account (HSA) could help you cover unexpected medical expenses. You can contribute pre-tax or tax-deductible income to an HSA account, earnings grow tax-free, and funds aren’t taxed when you use them to pay for qualified medical expenses.

Read more about using HSAs in retirement.

 

4. Long-term care


Almost 70% of people turning 65 today will need long-term care at some point in their life.3 Expenses from conditions that are chronic and require extensive healthcare, such as Alzheimer’s, are generally not covered by Medicare.

How to prepare: Increase your savings and insurance

Boosting the amount you contribute to your retirement savings annually, or whenever you have extra cash, may help prepare your nest egg for significant expenses. Long-term care insurance might help ease some of the financial strain of future illnesses.

Here are 7 things to know about long-term care insurance.

 

5. Longevity


The average age of retirement in the U.S. is 63 for women and 65 for men, and the average length of a person’s retirement is 20 years.4 It’s important to consider that you could live longer.

How to prepare: Save as much as you can, when you can

The earlier you start saving, the more compounding interest can help you reach your retirement goals. And as you approach retirement, consider moving toward a more conservative investing approach.

 

Financial professionals can help


One way to have more confidence and clarity in retirement is to work with a financial professional that can help plan for your expected—and unexpected—expenses.

 

It’s never too early to start planning for retirement. Review 11 important factors in this retirement planning checklist.

Related content

Friction: How it can help achieve money goals

6 pandemic money habits to keep for the long term

Your guide to breaking the rental cycle

4 ways to free up your budget (and your life) with a smaller home

How to build wealth at any age

Retirement planning in the gig economy

A beginner's guide to investing

How having savings gives you peace of mind

Dear Money Mentor: How do I set and track financial goals?

Money management guide to financial independence

Buying or leasing? Questions to ask before signing a contract

Home buying myths: Realities of owning a home

How I did it: Turned my side hustle into a full-time job

Is your financial plan keeping pace with your life?

3 types of insurance you shouldn’t ignore

What military service taught me about money management

What is Medicare? Understanding your coverage options

5 steps to take before transitioning your business

Year-end financial checklist

7 year-end tax planning tips

Should I itemize my taxes?

Car shopping Buying versus leasing your next vehicle

I own two electric vehicles. Here’s what I’ve learned about buying and driving EVs.

Tips for working in the gig economy

Is it time to get a shared bank account with your partner?

Money Moments: 3 tips for planning an extended leave of absence

Financial gifts can be a valuable – and fun – choice for the holidays

Key components of a financial plan

7 things to know about long-term care insurance

Retirement planning strategies for dual-income families

Key milestone ages as you near and start retirement

How to prepare for a recession: 6 steps to take

How to open and invest in a 529 plan

Your 4-step guide to financial planning

What to do when you lose your job

4 financial considerations before changing jobs

Annual insurance review checklist

Should rising interest rates change your financial priorities?

6 common money mistakes to avoid

How grandparents can contribute to college funds instead of buying gifts

U.S. Bank asks: Transitioning out of college life? What’s next?

5 times you may need a financial advisor

For today's homebuyers, time and money are everything

Here’s how to create a budget for yourself

Understanding guardianship and power of attorney in banking

How to use debt to build wealth

8 steps to choosing a health insurance plan

The connection between your health and financial well-being

Is a Health Savings Account missing from your retirement plan?

How to winterize your vehicle

Take the stress out of buying your teen a car

Financial steps to take after the death of a spouse

4 steps to finding a charity to support

Estate planning documents: Living trusts vs. will vs. living will

Unexpected retirement expenses

What financial advice would you give your younger self?

How to manage your money when you're self-employed

Personal loans first-timer's guide: 7 questions to ask

How I did it: Bought a home without a 20 percent down payment

House Hacks: How buying an investment property worked as my first home

How to set yourself up for success in your first job

Travel for less: Smart (not cheap) ways to spend less on your next trip

Working after retirement: Factors to consider

7 ways for pre-retirees to get ready for retirement

Multiple accounts can make it easier to follow a monthly budget

9 simple ways to save

Are savings bonds still a thing?

How I did it: Learned to budget as a single mom

How to stop living paycheck to paycheck post-pay increase

Do your investments match your financial goals?

5 financial goals for the new year

Money Moments: Tips for selling your home

Parent checklist: Preparing for college

Which is better: Combining bank accounts before marriage — or after?

Don’t underestimate the importance of balancing your checking account

Do you and your fiancé have compatible financial goals?

LGBTQ+ financial planning: 7 reasons why it matters

Reviewing your beneficiaries: A 5-step guide

Retirement income planning: 4 steps to take

LGBTQ+ retirement planning: What you need to know

Using 529 plans for K-12 tuition

How to retire happy

How to protect your digital assets in your estate plan

Can fantasy football make you a better investor?

Insource or outsource? 10 considerations

Investment strategies by age

6 tips on trust fund distributions to beneficiaries

How to track your spending patterns

How to manage your money: 6 steps to take

How to discuss money with your family

Good debt vs. bad debt: Know the difference

Avoid these 6 common mistakes investors make

How to establish your business credit score

4 tips to help you save for retirement in your 20s

4 reasons estate planning is important

Unexpected cost savings may be hiding in your payment strategy

Checklist: 10 questions to ask your home inspector

5 things to avoid that can devalue your home

30-day adulting challenge: Financial wellness tasks to complete in a month

5 reasons why couples may have separate bank accounts

7 steps: How couples and single parents can prepare for child care costs

Adulting 101: How to make a budget plan

What you need to know about renting

How and when to ask for a raise

How can I help my student manage money?

How to save for a wedding

How to save money while helping the environment

It's possible: 7 tips for breaking the spending cycle

Money Moments: 3 smart financial strategies when caring for aging parents

Personal finance for teens can empower your child

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

Webinar: Uncover the cost: International trip

Your guide to starting a job: Resources to help along the way

It’s time for a fresh start: A new way of thinking

U.S. Bank asks: Do you know your finances?

Money Moments: 8 dos and don’ts for saving money in your 30s

Money Moments: How to manage your finances after a divorce

3 awkward situations Zelle can help avoid

What’s in your emergency fund?

Webinar: Uncover the cost: Building a home

10 questions to ask when hiring a contractor

10 ways to increase your home’s curb appeal

Webinar: Uncover the cost: Home renovation

Beyond the mortgage: Other costs for homeowners

Tips for navigating a medical hardship when you’re unable to work

11 essential things to do before baby comes

How to plan and save for adoption and in vitro fertility treatment costs

Closing on a house checklist for buyers

Resources for managing financial matters after an unexpected death

What you need to know as the executor of an estate

What documents do you need after a loved one dies?

How to prepare for a natural disaster

Student checklist: Preparing for college

Webinar: Uncover the cost: College diploma

How I did it: Paid off student loans

Webinar: Bank Notes: College cost comparison

From LLC to S-corp: Choosing a small business entity

7 steps to keep your personal and business finances separate

How to apply for federal student aid through the FAFSA

Be careful when taking out student loans

Your financial aid guide: What are your options?

Military homeownership: Your guide to resources, financing and more

Crypto + Homebuying: Impacts on the real estate market

Webinar: Mindset Matters: How to practice mindful spending

Webinar: ESG for Corporations: Building an all-weather, long-lasting strategy

Common pitfalls to avoid in the equipment financing process

The secret to successful service provider integration

Questions to ask before buying a car

What you should know about buying a car

How to get started creating your business plan

Talent acquisition 101: Building a small business dream team

Make your business legit

7 tips to help grow your business after launch

How to test new business ideas

Costs to consider when starting a business

How to redefine challenges with business collaboration

How to sell your business without emotions getting in the way

10 tips on how to run a successful family business

The costs of hiring a new employee

How to expand your business: Does a new location make sense?

How to build a content team

Finance or operating lease? Deciphering the legalese of equipment finance

Safeguarding the payment experience through contactless

ABCs of ARP: Answers to American Rescue Plan questions for counties

Should you buy a house that’s still under construction?

COVID-19 safety recommendations: Are you ready to reopen?

1 “Consumer Expenditure Survey, 2020.” U.S. Bureau of Labor Statistics.
2 “NHE Fact Sheet.” Centers for Medicare and Medicaid Services.
3 “How Much Care Will You Need?” U.S. Department of Health and Human Services.
4 “Average Retirement Age in the United States.” The Balance.
Start of disclosure content

Investment and insurance products and services including annuities are:
Not a deposit ● Not FDIC insured ● May lose value ● Not bank guaranteed ● Not insured by any federal government agency.

U.S. Wealth Management – U.S. Bank | U.S. Bancorp Investments is the marketing logo for U.S. Bank and its affiliate U.S. Bancorp Investments.

The information provided represents the opinion of U.S. Bank and U.S. Bancorp Investments and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank, U.S. Bancorp Investments and their representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

For U.S. Bank:

U.S. Bank does not offer insurance products but may refer you to an affiliated or third party insurance provider.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.

For U.S. Bancorp Investments:

Investment and insurance products and services including annuities are available through U.S. Bancorp Investments, the marketing name for U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.

U.S. Bancorp Investments is registered with the Securities and Exchange Commission as both a broker-dealer and an investment adviser. To understand how brokerage and investment advisory services and fees differ, the Client Relationship Summary and Regulation Best Interest Disclosure are available for you to review.

Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License #0E24641.

Pursuant to the Securities Exchange Act of 1934, U.S. Bancorp Investments must provide clients with certain financial information. The U.S. Bancorp Investments Statement of Financial Condition is available for you to review, print and download.

The Financial Industry Regulatory Authority (FINRA) Rule 2267 provides for BrokerCheck to allow investors to learn about the professional background, business practices, and conduct of FINRA member firms or their brokers. To request such information, contact FINRA toll-free at 1-800‐289‐9999 or via https://brokercheck.finra.org. An investor brochure describing BrokerCheck is also available through FINRA.

U.S. Bancorp Investments Order Processing Information.