9 Big Expenses That Could Ruin Your Retirement Plan

RETIREMENT - RETIREMENT PLANNING
You might spend more money in retirement than you expected to, but planning for these big expenses could salvage your financial security.
Updated May 8, 2024
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Most people put in a lot of effort and save a lot of their hard-earned cash every month for years in order to retire. The quality of that retirement can depend on how much money you save and end up spending.

Costs in retirement are not fixed, and some expenses could ruin your retirement if you're not prepared for them. So while the ability to build wealth is important, knowing what expenses to prepare for is vital.

Here are nine expenses that you can't afford to ignore as you prepare for retirement.

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Health care (Medicare isn’t free)

Tinashe Njaku/peopleimages.com/Adobe nurse wearing blue scrubs explaining to senior lady on tablet

While contributions to Medicare have been deducted from your paycheck all of your working life, you’ll still have to move past uncovered expenses when you enroll in Medicare.

Medicare pays for many medical bills, but you should still expect to pay some costs out of pocket, including premiums and deductibles.

Medicare Part B enrollees can expect to pay a standard monthly premium of over $160 in 2023, according to the Centers for Medicare and Medicaid Services. Inpatient hospitalizations for Medicare Part A enrollees are more costly, with a $1,600 deductible in 2023.

Housing

twinsterphoto/Adobe back shot of senior couple standing in front of porch of house

According to the Consumer Expenditures Survey, housing is the number one expense for seniors, running $1,573 per month on average.

Besides a mortgage payment, you'll also need to factor in property taxes, repairs, insurance, utilities, homeowners association fees, and other expenses.

Fortunately, you can take steps to keep housing costs under control during retirement. If possible, consider paying off your mortgage before you stop working. Living in a state with low property taxes and downsizing to a smaller home can also help keep costs to a minimum.

Entertainment

Studio Romantic/Adobe senior couple ready for travelling standing with suitcases

Without the need to work every day, you’ll want to find something to do with your time. Entertainment purchases include more than movie admission or a round of golf.

One of the largest entertainment costs for seniors is travel. This may be a regular expense if you relocate away from family and friends.

Average domestic airfare in 2022 was nearly $400, which was surpassed in the summer of 2023. Plus, you’ll need to pay for hotel stays and other travel-related expenses.

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Food

Viacheslav Yakobchuk/Adobe senior couples enjoying food at restaurant

Food is a necessary and ongoing expense, and one of the bedrock rules of frugal living is to eat at home.

However, high inflation rates in 2022 affected all kinds of consumer goods, particularly grocery bills. Food prices rose 10.8%, more than they had in 40 years.

Saving money on groceries before you retire and finding ways to supplement your income can help ensure your budget allows for rising food costs in the future. 

Transportation

ponsulak/Adobe wearing sunglasses driving car

Transportation expenses include gasoline, car payments, car insurance, and maintenance. If you don't have a personal vehicle in retirement, it could mean bus fare or taxi services.

Besides traveling to and from doctor’s appointments, you might want to go grocery shopping or out just for fun. Recent increased costs of gasoline affected more than a car fill-up. Higher prices meant that transportation services increased their fares as well.

You can better prepare yourself for transportation costs by entering retirement without an auto loan and factoring in these costs when you plan your budget.

Long-term care

nelzajamal/Adobe stethoscope on notebook with long term care note

Medicare doesn't cover most long-term care for seniors. However, many seniors will need long-term care at some point. This usually happens when you can no longer live and care for yourself independently.

If you have a high-deductible health plan, you can open a health savings account (HSA). An HSA works much like a (401)k, allowing you to contribute pre-tax funds to use toward qualified medical costs.

Another option is long-term care insurance, which is sold by private health insurance companies. The younger you are when you take out a policy, the lower your premiums will be.

Child in financial need

digitalskillet1/Adobe man giving advice to a teenager

Adult children sometimes run into financial difficulty. Helping them with a hundred dollars here and there might not ruin your retirement, but supporting them financially for extended periods of time can.

Even $100 a month adds up to $24,000 over 20 years. That's a lot of extra money to add to your retirement fund, especially when you factor in your own costs of living and inflation.

Helping them with larger expenses can make that number significantly larger, especially as they have a whole household to take care of. 

Loss of a spouse

LIGHTFIELD STUDIOS/Adobe sad senior man leaning on cane in room

Losing a spouse is emotionally draining, but it can also drain you financially.

If your partner was still working at the time of their death, you could lose an additional income and face a higher tax rate filing as a single. If you were both retired, you will lose their Social Security benefits.

You can financially prepare yourself for the unexpected loss of a spouse by making sure your life insurance is up to date, you have adequate savings, and you're an equal account holder on lines of credit. These steps can lessen the burden in such a crisis.

Taxes

insta_photos/Adobe senior couple sitting on table reviewing documents

Whether or not you plan to work after retirement, you’ll need to pay income tax. Besides tax on your income and retirement account withdrawals (unless all of your money is in a Roth IRA), you might need to pay tax on your retirement benefits as well.

Some states tax retirement benefits, even from Social Security. Knowing the tax laws in the state you plan to retire to will help you create the best financial plan.

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Bottom line

pikselstock/Adobe senior woman writing something on paper

With the average life expectancy in the U.S. approximately 79 years, there's no way to know exactly how long your retirement savings will need to last.

Financially preparing for retirement is complicated. There are many factors, including inflation, you need to take into account, and no way to accurately predict all the costs you may incur.

You can avoid throwing away your money by managing your expenses in retirement. But saving as early as possible, making a solid retirement plan, and creating a budget can also help you have a comfortable retirement.

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Author Details

Katelyn Washington Katelyn Washington is a writer with a passion for finance and business. She put herself through business school as a single mother of three and has had pieces commissioned by national magazines. When she’s not writing, she enjoys spending time with her family and editing manuscripts for indie authors.

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