You’ve got your retirement plan in place. Budgets have been drafted, portfolios sufficiently diversified, i’s dotted, and t’s crossed. It’s time to sit back, relax, and enjoy a drink by the pool, confident that your nest egg will carry you across the finish line.
Not so fast. While you may have such predictable indicators as housing, transportation, and dining covered, there are a variety of unanticipated expenses that could pop up at a moment’s notice and will dramatically change the view on your financial horizon.
Some estimates put total healthcare costs for retirees at as much as $275,000 per couple. Contrary to popular belief, the government doesn’t necessarily have your back when those bills come due.
While Medicare will cover certain expenses, the long list of what it doesn’t provide includes hearing aids, dental care, dentures, and foot care, all of which are facts of life for a sizable percentage of seniors. But the biggest uncovered expense is long-term care, which is where the dollars really start to matter. That means long-term healthcare insurance may be a valuable investment, particularly for workers in their younger years. Health Savings Accounts (HSAs) are also useful ways to put tax-deductible funds aside for the future.
Your home and your car
Unexpected home or car repairs are a fact of life at any age, and on the surface, they seem somewhat benign. But those costs—a couple hundred here, a few thousand there—can add up over time, creating a slow drip that will eventually bore a gaping hole in your savings.
Those darned kids
Young adults today typically stay in school longer, postpone marriage (or opt out of it entirely), eschew the stock market, and often show little interest in buying a home. This combination of factors may be why, as of 2015, a third of 18- to 34-year-olds lived with their parents.
While some moms and dads may love having the kids close by, it may put off the date when they can retire. If this situation sounds a little too familiar, it’s time for a family meeting. Be supportive but firm as to when you expect the little birds to fly on their own so that you can begin your next, well-earned stage of life.
Those darned parents
It’s bad enough that your millennial son or daughter is camped out in your basement, but it’s increasingly possible that your mom, your dad, or another close elderly relative is bunking in your loft. If so, you may be a member of the “Sandwich Generation,” and you’re not alone. In 2017, 14 percent of shared households had a parent living with their adult child.
Not only does this make for crowded quarters, but it also gets expensive quickly. As many as one in seven adults in this situation provide financial assistance to both parents and children. Encourage your parents to be transparent about their money worries so you can plan accordingly. If an unexpected crisis occurs, Medicaid in some states will cover in-home care for people with lower incomes.
As fickle as finances are, you can take heart in knowing that your life partner will be there by your side to face the future. Right? Perhaps not. Since 1990, the divorce rate for Americans over 65 has nearly tripled, with the rate doubling for adults 50 and older. Couples who remarry end up divorcing at twice the rate as those who marry once. The rate is going up for long-term couples as well—just over one-third of divorcees age 50 and up had been with their partners for at least 30 years, and one in 10 were together for at least 40 years.
Alongside heartbreak, divorce also brings expenses and a potential loss of assets. An average litigated divorce can run $15,500 or higher. One or both of you will likely need to find new housing, bringing rent or mortgages back into your lives. It may also affect your taxes, as recent changes have eliminated alimony deductions in some cases.
Avoid surprises, plan ahead
If any of these scenarios becomes reality, have a plan in place for dealing with emergencies. Know where the money will come from to deal with a crisis situation.
Avoid pulling from your investments to pay for last-minute expenses, particularly if your portfolio is on a downward swing.
Set up a line of credit earmarked for emergencies only.
Make sure healthcare is front and center when making these decisions. Whatever you have socked away for it now, assume it’s not enough.
Talk about these issues ahead of time. Be proactive with your doctor, get those mileage checks on the family sedan, sit the kids down for a heart-to-heart, have tea with Mom and Dad. An awkward conversation today could just save your retirement nest egg tomorrow.
Any unanticipated expense is easier to handle with a solid retirement plan in place. Start today with our Popular Retirement Plans e-book.