Saturday, April 13, 2024

3 Expenses That Today’s Retirees Underestimated

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Surprised retiree
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Building the perfect retirement is not easy. Your plan will likely have to carry you through many decades of life without a steady paycheck.

No matter how diligently you approach the matter, the strategy you settle on will probably be an educated guess at best.

Many retirees begin to realize this truth a few years into retirement. At that point, they can see that while they were on target in estimating some expenses, they underestimated others.

Recently, the Employee Benefit Research Institute released the findings from its 33rd annual Retirement Confidence Survey. As part of that study, the EBRI asked more than 1,200 retirees to list the expenses they most underestimated before they entered their golden years.

Following are their answers.

1. Health care or dental expenses

Home health aide
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Retirees who said this expense is:

  • “Much higher” than expected: 13%
  • “Somewhat” higher than expected: 25%

Some people mistakenly believe Medicare will cover all their health care expenses during retirement. Others think dental coverage is a part of government-managed Original Medicare, one of the two types of Medicare, the other being Medicare Advantage plans from private insurers.

Both beliefs are false, as many retirees unhappily discover. For more, check out “Medicare Will Not Cover These 10 Medical Costs.”

2. Housing expenses

Retired couple on their porch
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Retirees who said this expense is:

  • “Much higher” than expected: 12%
  • “Somewhat” higher than expected: 21%

Very few people are surprised that maintaining a house can be expensive. But these costs are higher than many people expect in retirement.

In fact, housing costs are by far the biggest expense retirees face — nothing else comes close. To learn how to trim this expense, check out “8 Ways to Cut Housing Costs in Retirement.”

3. Taxes

Unhappy senior couple doing taxes
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Retirees who said this expense is:

  • “Much higher” than expected: 9%
  • “Somewhat” higher than expected: 21%

Even in retirement, taxes are impossible to escape. Many people see their tax bills fall substantially in retirement, but that is not true of everyone.

In fact, some people find that their income in retirement is high enough that at least some of their Social Security benefit ends up going back to the government in the form of taxes.

Of course, you can lower this cost by choosing to retire in the right state — such as one of the “7 States That Are Cutting Retirees’ Taxes for 2023.”

Other underestimated expenses

Unhappy senior woman who wants to travel
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Here are some additional expenses that nick retiree nest eggs more than anticipated:

  • Travel, entertainment or leisure expenses
  • Long-term care expenses
  • Spending to support or help a family member

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