Health Benefits Retirement Benefits

5 Unexpected Retirement Costs to Plan For

Mature man doing working at home

Life always brings the unexpected. However, most people only plan for the expected when it comes to saving for retirement.

After years of planning and saving, it can be harmful to your livelihood in retirement when unexpected costs come up. Research from the Society of Actuaries (PDF) found that about one in five retirees and one in four retired widows experience four or more “shocks” during retirement. It’s not about if, but when will unexpected costs arise. So, it’s important to consider these five surprising costs when planning for retirement.

1. Housing Expenses

The Society of Actuaries determined that unanticipated home repairs are retirees’ single most common financial surprise. For example, you may need to deal with roof maintenance, fix plumbing issues, or replace your HVAC. Most retirees also fail to account for long-term housing upgrades, like adding exterior ramps, walk-in tubs, or lowering counter tops.

Anticipating changing needs can help you identify hidden problems to plan for. Some people downsize their homes after retirement to save in housing costs as well.

2. Health Care Costs

If you are age 65 or older, you may have already enrolled in Medicare, a government-provided health insurance program. People usually overestimate how much Medicare covers in medical expenses. Medicare Part A, B, D, and Medicare Advantage (Part C) all cover different amounts and types of expenses. Many other routine expenses and services—such as dental, hearing, and vision care—may not be covered and may cost extra.

The different parts of Medicare help cover specific services:

  • Medicare Part A (Hospital Insurance)
    Helps cover inpatient hospital stays, skilled nursing facilities, hospice care, and some home health care.
  • Medicare Part B (Medical Insurance)
    Helps covers certain doctors’ services, outpatient care, medical supplies, and preventive services.
  • Medicare Part D (Prescription Drug Coverage)
    Helps cover the cost of prescription drugs (including many recommended shots or vaccines).

To better understand Medicare and the different plans, read our Medicare Enrollment Guide (PDF).

3. Long-Term Care

The U.S. Department of Health and Human Services estimates that close to 70% of today’s 65-year-olds will require long-term care for an average of about three years. Medicare does not cover long-term care when you need help with activities of daily living, which is the type of care many older people need, especially if they live alone.

Some retirees may be able to rely on families for help, but those who can’t most likely will cover those costs out of pocket or through long-term care insurance programs.

To estimate the costs of different levels of long-term care in your area, you can use the Genworth’s Cost of Care calculator. One way to combat long-term care costs earlier in your career is to set up a health savings account that can help cover out-of-pocket medical and long-term care expenses.

4. Family Crisis

Life events of your children, grandchildren, siblings, or relatives may also impact your financial well-being in retirement. A child may need financial help, or a sibling may need caregiving as they’ve grown older.

During these life events, you may naturally feel obligated to help physically and financially. Before offering your support, really determine what that means and if there are other options to assist. Having clear expectations will help you and your family in the long run. Some sample questions to ask are:

  • Does this event require you to use your savings account or dip into other sources of income?
  • Can you provide smaller payments, provide an occurring allowance, or cover smaller costs?
  • How long will you need to provide financial support?
  • Has your relative exhausted all other options?
  • Is the money you provide a gift or a loan?

5. Death of a Spouse

It’s unfortunate to think about or plan for, but if you’re married, there is a need to face the possibility of the death of your spouse while in retirement. Not having a plan or some preparations to fall back on can cause an even more traumatic experience for the surviving spouse and family members. You’ll need to consider what will happen to your spouses’ retirement benefits, savings accounts, Social Security payments, and any assets owned.

If your spouse is a CalPERS member or retiree, you should designate your beneficiary for your pension plan as early as possible. Having a designated beneficiary will ensure benefits are paid to the correct person in a timely manner. In the unfortunate event your spouse passes away, you must notify us so we can begin processing the death benefits.