When many people think about retirement, they primarily think about the lifestyle they look forward to leading. But to be truly prepared, it’s vital to be aware of the “unexpected” expenses of retirement.
Below, eight professionals from Forbes Finance Council share expenses those planning for their retirements need to anticipate, as well as tips for preparing to meet them.
Members of Forbes Finance Council share expenses many people overlook when planning for retirement.
Photos courtesy of the individual members.
Many people overlook the cost of healthcare in retirement. To avoid being hit with unexpected expenses, my best advice would be to make sure you have comprehensive healthcare. Know that Medicare doesn’t cover everything. Having dental, vision and hearing plans in place as well could save you an amount in the future that would dwarf all your premiums. – David Haass, Elite Insurance Partners, LLC
2. Long-Term Care
One concern that people overlook is the cost of long-term care. Many life insurance policies now have what are called “living benefits,” which sums up to life insurance you can use while you’re living. You do not want what’s called a “living death,” where you are alive but killing everybody else financially because you are alive. Having a life policy that you can access if you get sick is very important. – Tayvon Jackson, New Perspective Financial Solutions
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3. Deferred Taxes
In retirement, many people focus on trying to have enough income to maintain their lifestyles, but not many take into consideration that the majority of their retirement may be tax-deferred; thus, they will need more money in retirement to pay the tax. Having two buckets of money to pull from will help reduce the tax burden and allow the nest egg to go farther. – Karla Dennis, Karla Dennis and Associates Inc.
4. Higher Tax Rates
One of the most overlooked expenses in retirement is taxes. This is an unknown that must be planned for and is also a retirement risk that can be mitigated with proper planning. Financial modeling needs to account for the possibility of higher taxes in the future, as that has a direct affect on one’s spendable income in retirement. This “begin with the end in mind” approach will help tremendously. – Will Duffy ChFC, RICP, EA, WD Wealth Strategies
5. Home Renovations
A 2018 AARP survey found one-third of adult homeowners expect their homes to need major renovations so they can live there through retirement. Most people underestimate the costs of emergencies, especially when it comes to their homes. Thinking about worst-case scenarios and having extra money in your emergency fund is a must. – Gabriela Berrospi, Latino Wall Street
6. Caring For Family Members
Unexpected caregiving costs often catch retired folks off guard. With a rising number of college graduates living at home, retired parents might run into additional costs. Additionally, a retired couple or individual may need to step in to take care of an aging parent. It is important to revise your financial plan with a financial advisor as soon as these unexpected caregiver costs arise. – Sonya Thadhani Mughal, Bailard, Inc.
7. Previous Business Expenses
Business owners need to double-check their assumptions about living expenses before retirement because they often underestimate the expenses that the business currently pays for. For example, upon retirement, a cell phone bill that had been paid from a business account becomes a personal expense. Take a hard look at the expenses your business is covering that may continue in retirement. – Justin Goodbread, Heritage Investors
One of the greatest unknown and overlooked considerations in retirement planning is how long someone might live. Outliving retirement savings and having to adjust one’s lifestyle to stretch the remaining savings or relying on family to bridge any gaps are very real risks and concerns. Products that offer guaranteed lifetime income can help temper these worries and provide peace of mind. – Jim Poolman, Indexed Annuity Leadership Council