The Cost of Retirement: What are the Surprise Expenses?

man looking at paper, surprise cost of retirement

It’s never been more expensive to retire in the United States. This means it’s important for you to plan your finances carefully and well in advance. The cost of retirement may be high, but you can prepare yourself by anticipating a few of retirement’s surprise expenses.

1. Medicare premiums

If your Medicare premiums are taken out of your Social Security check every month, you may forget about this expense entirely. But with more and more baby boomers aging into Medicare every day and the cost of living growing equally as fast, healthcare costs are on the rise. This means your Medicare premiums will likely go up several times throughout your retirement.

2. Additional healthcare costs

But premiums aren’t the only healthcare costs you should worry about. Medicare only pays for 80% of covered healthcare items and treatment, so you will need to pay the remaining 20% as well as deductibles, copays, and coinsurance. Twenty percent may not seem like very much, but if your health changes, it could add up.

According to a Fidelity, a couple who retires in 2019 at age 65 will need $285,000 dedicated to healthcare expenses. That’s more than a quarter of a million dollars, and this estimate doesn’t include things like vision and dental care, neither of which are covered by Original Medicare.

3. Medication costs

In 2013, seniors took an average 27 different medications to manage acute and chronic illnesses. The older you get, the more likely it is for your medication regimen to intensify. A medical alert system with medication reminders can help you stay on top of this, but what about the medication costs?

Because Part D plans are provided by private insurers, these costs could change from year to year, including the price of prescription drugs. If your Medicare plan changes your share of the price of your prescription drugs or the plan decides to no longer cover your medication, the insurer must provide you with 60 days notice. During this time, you can decide if you’d like to keep your plan or look for one with coverage better suited to your healthcare needs.

infographic showing surprising expenses in retirement

4. Long-term healthcare

Medicare does not pay for long-term care like an assisted living facility or nursing home. Medicare for All would likely expand Medicare to cover long-term healthcare, but until that happens, it would be wise to anticipate this cost of retirement, even if you don’t think you’ll ever need it.

5. Late-in-life divorce

Although couples who make it to retirement while married are less likely to divorce, “gray divorce” is becoming more common. According to the Pew Research Center, divorce rates amongst retirees have doubled since the 1990s. Splitting up in retirement can completely change your cost of retirement and plans you’d made.

6. Caring for elderly parents

Your expenses and health are not the only things to take into account for retirement. Because people are living longer now than ever before, the likelihood of caring for your elderly parents while being retired yourself is fairly high. Before you get hit with unexpected healthcare or living expenses for your elderly parents, talk to them about their plans.

7. Inflation

Inflation is a cost of retirement that could easily slip your mind. However, it’s important to remember that $100 today won’t be the same amount as $100 nine years from now. When you begin preparing for retirement, sit down with a financial advisor who can help you adjust all of your retirement expenses with anticipated rates of inflation in mind.

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