Dealing with Unexpected Expenses in Retirement

As you plan for retirement, it’s exciting to think of all the things you’ll have time to do, including traveling more, spending time with family, and even picking up a new hobby. However, in planning for retirement, you have to also plan for the number of expenses along the way.

While you might plan for many of the expenses associated with retirement, there may be unexpected things that come up. Here is a list of a few unexpected expenses that may crop up in retirement.

Healthcare Expenses

The United States has a very robust Medicare system, but that doesn’t mean that every healthcare expense in retirement will be covered by insurance. This is where your healthcare costs in retirement have the potential to skyrocket.  Just beware.

One example of a service that may not be covered under Medicare is long-term care. According to the Government of Canada, many long-term care facilities and home-care services “charge co-payments or extra fees for additional services that aren't provided under the long term plan.”¹

In addition to long-term care, Medicare may also not cover expenses related to²:

• Ambulance services
• Transportation to/from treatment
• Home care
• Prescription drugs (depending on your insurance)
• Over the counter treatment and supplies
• Occupational therapy outside of a hospital

As you plan for retirement, consider all of the health-related expenses that may arise.

Investment Losses

As you work with your financial advisor, you can develop a long-term investment plan that is focused on retirement planning. That being said, you can never completely predict the market so investment losses may be one of your financial considerations. To mitigate this risk, make sure that your investment portfolio aligns with the amount of risk you are willing to take, especially in retirement. 

Home Maintenance

After retiring, you may find that you’re spending more time at home, and you might want to make some home upgrades. While you can plan for many of these changes, some might arise unexpectedly. If your health changes or you face a medical procedure, you may need to adapt your home to be more accessible.

Or you may find yourself in a situation where you have to care for a loved one, whether it’s an aging parent or relative, or you have to provide a place for your adult children to come if they need assistance. Even if these situations aren’t in your initial plan, they may be worth planning for as you consider your home maintenance in retirement.

Hobby Expenses

Retirement is a time to celebrate everything you accomplished in your career and take time to enjoy the small things in life.   Get after that "bucket-list".  We don't get another go around... and if we do, no one has verbalized it yet.  Hence at magii we always say that the first 10 years (from our experience with retired clients that have come before you) is the "GO-GO" years... you are traveling, doing active hobbies and donating times to charities, etc..  The next 10 typically a bit slower as we age and things tend to catch up to us.  Let's call them the "SLOW-GO" years.  Our last 10 the "NO-GO" years (typically when clients tend to stay home and no longer travel).

That being said, some retirees might be caught off guard by the cost of these new hobbies and activities. Because retirees are on a fixed income, it’s important to plan for these expenses in detail so they don’t crop up unexpectedly.

How to Deal With Unexpected Expenses in Retirement

Of course, this is just a short list of the many unexpected expenses that can arise during retirement. But luckily, you can help protect your retirement income by anticipating the unexpected. As you work with your financial advisor, consider:

• Aligning your retirement plan with your goals
• Setting aside an emergency fund for unexpected expenses
• Maximize tax savings by maximizing your RRSP and TFSA contributions during your working years
• Time your withdrawals to reduce your overall tax bill
• Ensure that your investments are aligned with your risk tolerance

Retirement planning is an exciting process and requires detailed planning to anticipate both the expected and unexpected expenses. Working with a qualified Certified Financial Planner(r) can help you feel secure in your retirement planning.  Call MAGII today with any questions you have!

1. https://www.canada.ca/en/financial-consumer-agency/services/insurance/long-term-care.html
2. https://www.cbcn.ca/en/whats-covered-by-medicare

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.