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The Hidden Retirement Expenses You Should Be Planning For, According to Schwab


Despite your best planning and efforts to prepare for retirement, you’re still likely to encounter some kind of unexpected challenges after you stop working. According to Charles Schwab, there are five retirement surprises, which might come as a financial shock to many older workers. However, if you’re prepared, you can avoid allowing seeing these disruptions derail your golden years. 

Consider working with a financial advisor to create or update a retirement plan.

“Withdrawing an extra $10,000 from savings for a new roof might not seem like much in the grand scheme of things, but it can interfere with plans for other expenses if you haven’t anticipated it—especially since those funds are now no longer at work in the market,” says Rob Williams, managing director of financial planning at the Schwab Center for Financial Research.

Hidden Housing Costs

Unexpected home repairs are the most common surprise, according to the Society of Actuaries. That can include needing an entirely new roof, furnace and air-conditioner, major plumbing problems and other issues that can lurk in a paid-off home you’ve owned for years.

Experts recommend setting aside 1% to 2% of your home’s current value for annual maintenance and repairs, as well as having your home thoroughly inspected by a professional who can help you identify potential problems. Another consideration is budgeting for improvements that can help you age in place, such as wheelchair access, a walk-in shower, better lighting, ergonomic door handles and more.

Uncovered healthcare costs

The Hidden Retirement Expenses You Should Be Planning For, According to Schwab

Healthcare is the single biggest line item retirees need to consider. While Medicare can be a huge benefit for retirees, don’t assume it covers everything. While Medicare Part A covers hospital stays and Part B covers doctor visits, you’ll still face prescription costs and co-pays for services. In addition, dental, vision and hearing care aren’t covered under basic Medicare. 

Adding Medicare Part D coverage can handle prescription costs, while private Medigap insurance can be added to handle expenses not covered by Medicare. Another option is to look at one of the many Medicare Advantage plans, which include Part A and Part B and can add coverage for vision, dental and other costs. 

Retirees should budget between $450 and $850 a month for each person, including insurance premiums and out-of-pocket costs. If you’ve got the option while working, consider opening a health savings account (HSA), which allows you to save and invest tax-free and doesn’t tax withdrawals for eligible healthcare expenses, including Medicare premiums. 

Long-term care

The cost of extended care as you age can be shocking: A private room in a nursing home can run more than $100,000 each year, while a home care aide will run you around $50,000. Medicare doesn’t cover long-term care and Medicaid assistance is available only after retirees spend down their assets to qualify for low-income status.

While some retirees can depend on their own substantial savings or one help from family members, another option is to purchase long-term care insurance or to add a long-term care rider to a whole life insurance policy or an annuity. The best time to shop for long-term coverage is in your 50s or early 60s.

Aid to adult children

It’s only natural to want to help a son or daughter hit by a financial crisis. Decide how much assistance you can reasonably afford and set clear limits with family members before doling out money from your retirement assets. If you expect to be repaid, structure the loan with a written agreement. If you’re giving money outright, remember that gift taxes apply to any amount over $17,000 made in one year. 

Death of a spouse

Beyond the emotional shock of losing a life partner, there can be significant financial implications, too. To stave off this eventuality, put together a financial plan that includes the loss of either spouse, along with an up-to-date will, power of attorney and healthcare power of attorney. Even a couple with simple finances can benefit from an estate plan. 

The financial options include insurance to cover final costs and the loss of income, as well as structuring pension payments so that they continue after the pension recipient passes on. Social Security survivor payments also need to be considered before you start collecting benefits. Surviving spouses can collect a portion of the deceased partner’s benefits as early as age 60 (or 50 if disabled). Delaying benefits after your full retirement age increases the benefit payment, which also leaves more for a surviving spouse to collect. 

Bottom Line

Once you’ve stopped earning income, protecting your retirement assets is the single most important financial move you can make.

Considering how you’ll handle healthcare expenses and other unpredictable retirement costs needs to be part of your retirement planning. 

Financial Tips on Retiring

  • When and how to collect Social Security benefits is a major retirement consideration, along with estate planning, insurance, tax considerations and more. For help planning your retirement, including how to pay for healthcare, consider working with a financial advisor. Finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Check out our retirement calculator to get a quick estimate of whether you have sufficient funds to support the lifestyle you aim for.

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