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3 Unexpected Expenses that Can Impact Your Retirement Income


A big part of your retirement planning is anticipating your expenses while in retirement. However, some potential expenses are more difficult to quantify than others. Here's a look at three items to watch out for.

Retirement savings jar

A big part of your retirement planning is anticipating your expenses while in retirement. You can probably envision the activities you’ll most want to pursue once you retire; for many, it’s taking advantage of the time to travel, play golf, volunteer, or join communities of like-minded people. Some of those items cost more than others, but all are relatively easy to estimate and anticipate.

But there are some items that may be more difficult to quantify. Those are the expenses in retirement that may seem to come out of nowhere. If you prepare for retirement with these expenses in mind, you’ll be ready for anything.

Medical expenses. As we’ve noted before, even healthcare professionals can be caught off-guard by unanticipated medical expenses. Medicare coverage is solid, but there are many expenses the program simply doesn’t cover, such as dental, vision, and long-term care costs. On that same note, have a plan set up in the unfortunate instance in which your spouse falls ill or passes away. Instead of two social security or annuity incomes, you could be down to one. Funeral expenses are also high and getting more expensive every year.

To prepare for these expenses, make sure your life insurance coverage is sound. Consider long-term care insurance, supplemental health insurance, and prescription drug coverage through Medicare Part D. You may never need the extra coverage, but if you’re in a position to put that money away now, you’ll enjoy your long-term good health even more knowing you’re prepared for a worse outcome.

Assistance for children, grandchildren, or elderly parents. When you plan for retirement, you may envision a large inheritance from your family or a successful, highly profitable pro sports career for your child helping boost your retirement income. Perhaps more likely, though, is the opposite scenario. As people live longer and longer, there is a chance you may be caring for your older parents, including some of the medical expenses mentioned above. You may also be asked to help out with money towards weddings, first homes, and other expenses from your children and perhaps their children.

There is no quick-fix solution to this potential issue, and no clear way to prepare for these events, but the key here is to put some contingency income into a liquid investment that is still earning interest but is available for a quick cash-out if you need it. As these situations develop, you can consider changing the investments to match your needs. For example, if your son turns out to be like Mark Zuckerberg or your daughter becomes the new Taylor Swift, you can move those funds into something less liquid with a potentially higher return.

Home improvement. Chances are, you won’t be blasting out that wall between the kitchen and dining room or adding a new master bedroom suite after you’ve retired. But a home getting a little long in the tooth requires more maintenance than a newer home, including potential expenses in plumbing, a new roof, or a new heating and cooling system. Consider also that your Bob Vila days may at some point be behind you, and you may be hiring someone else to do even nominal maintenance and house-cleaning chores.

You can’t plan for all contingencies, for sure, but the important part is that you plan for contingencies at all.

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Victor J. Dzau, MD, gives expert advice
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