Those that are prepared for retirement will often still be surprised when certain expenses appear. The surprise is usually in the magnitude of the expense rather than the expense itself.
While an emergency fund will help to cover the costs of unexpected expenses, it is still important to consider what these costs might be in order to be better prepared should they occur. Sometimes just being aware of a potential expense alleviates some of the stress that is experienced should the expense appear.
There are many resources about retirement expenses along with budgeting tools that outline potential expenses. However, here we will highlight five expenses that are either overlooked or underestimated:
Frauds and Scams
Dental, Vision, & Hearing
There are many potential unexpected expenses during retirement. The above represents only the top five based on our experience.
Frauds & Scams:
Frauds aimed at senior citizens have increased dramatically in recent years. This is probably due to the increase in ease of connecting online via the internet and email. This is not an “expense” in the traditional sense, but it is certainly a surprise to all involved.
Adult children should make sure they educate their parents on the potential scams that may appear. Knowledge is power in most instances. However, additional steps to protect your identity and access to your money are also recommended.
While pets can add an important element of companionship and sense of purpose for retirees, they can also be a financial burden. Many pet owners underestimate the cost of owning a pet. Health care emergencies and accidents can lead to medical bills for a pet that are not only unexpected, but also very high. Pet insurance is a potential option, but increasing the emergency fund to include potential pet expenses might also work.
Prescription drug plans (PDPs) are coupled with Medicare during retirement and usually cover most drug expenses. However, sometimes a new drug is prescribed that is more expensive than expected. It might be at a higher tier on the Medicare PDP formulary. Drug costs are certainly on the radar for many retirees, but new medical conditions and new drugs can create even more financial strain on a fixed budget. Planning for drugs costs can be extremely difficult, especially when guessing at the cost of a drug which currently isn’t needed by the retiree. Once on a prescription drug plan, it is a good idea to shop around each year based on your new drug needs.
Home repairs are a part of home ownership. Knowing that, many retirees purchase a house that has all the updates they want. Some will renovate their home at retirement so they can get those expenses out of the way. However, over time, new expenses will pop up. Renovations and fixes and purchases made at the beginning of retirement may not last all the way through retirement. Fifteen years can happen fast and can wear down a large ticket item, like a roof. Retirees should consider major home repairs that may not happen for another ten or twenty years. Additionally, a natural disaster like a hurricane or wild fire can add a major unexpected expense. While insurance covers these events, the deductible is usually very high and not something that is planned for.
Dental, Vision, & Hearing
Ancillary healthcare services such as dental, vision, and hearing are generally not totally covered by Medicare. Many retirees are surprised to learn that Medicare won’t cover hearing aids or tooth extractions. Therefore it is critical that additional plans are made to cover these expenses. Dental work in particular can be much more expensive as you age. Here is a video that goes into details on dental expenses in retirement.
Surprise expenses during retirement are inevitable. Oftentimes, the magnitude of the expense is what surprises the retiree the most. By being aware of potential expenses, along with the potential size of the expense, a retiree can alleviate a lot of the stress associated with such an expense. Through our experience with retirees, dental expenses seem to be one of the most common expenses that, while potentially unavoidable, are higher than expected.
Daniel J. Wendol is the owner of the Dolphin Financial Group. He is a CERTIFIED FINANCIAL PLANNER™, licensed as an Investment Advisor Representative, and also has an insurance license. He combines the investing and insurance worlds with a focus on retirement. ‘
Each week Dan hosts Dolphin Financial Radio, a podcast about the wide-ranging issues people face leading up to and through retirement.
Dolphin Financial Group acts in a fiduciary capacity to help people make life’s toughest financial decisions.