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Unexpected retirement expenses

When planning for your retirement, it’s wise to expect the unexpected. Here are five expenses that may disrupt your plan, and ways you can better prepare for them.

Tags: Retirement, Healthcare, Planning, Be prepared
Published: February 16, 2021

In retirement, unexpected medical bills or even cost-of-living expenses can surprise you and your finances. Careful planning can help you overcome potential financial hurdles and make the unexpected more manageable.

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Expense: inflation

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

Approach: start early

The earlier you start saving, the more compounding interest can help you reach your retirement goals. And don’t forget to account for inflation as you plan your retirement income.


Expense: underestimating needs

A person 65 years or older spends an average of $50,220 a year.1 Underestimating your retirement living expenses may make surprise expenses harder to deal with.

Approach: plan your needs, wants and wishes

Estimate your expenses as realistically as possible. Start with basic needs (mortgage, taxes, utilities, groceries and insurance), then your wants (new vehicle or home improvements) and then your wishes (travel or hobbies).


Expense: medical bills

It’s projected that healthcare spending will rise 5.4 percent on average from 2019 to 2028.As we age and our health declines, healthcare costs become more significant.

Approach: 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.


Expense: Long-term care

Almost 70 percent 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.

Approach: 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. Also, long-term care insurance might help ease some of the financial strain of future illnesses.


Expense: 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.

Approach: diversify your investments

Investing in a variety of assets could potentially help protect you from fluctuations in different investment markets such as bonds, stocks or real estate. And you may want to move toward a more conservative investing approach as you near retirement.


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.

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


1Consumer Expenditure Survey, 2019.” U.S. Bureau of Labor Statistics.
2NHE Fact Sheet.” Centers for Medicare and Medicaid Services.
How much care will you need?” U.S. Department of Health and Human Services.
4Average Retirement Age in the United States.” The Balance.