According to the Bureau of Labor Statistics (BLS), the retirement-aged person (65 and up) spends $52,141 a year, or around $4,345 monthly. Breaking this down further, those ages 65 to 74 spend $56,435 a year ($4,703 a month), while those who are 75 and up spend closer to $45,820 a year ($3,818 a month). This is based on 2021 data, the most recent data available, so the numbers may have increased.
But no matter what age you retire, it’s important to be prepared for the unexpected. This is particularly true when it comes to your finances. After all, costs continue to rise, and even the most prepared individuals can get hit with costs they never planned for.
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To get a better idea of the realities many Americans face upon retiring — and how to better prepare for them — GOBankingRates spoke with Scott DePeralta, who retired early but now serves as the president of Scott DePeralta Consulting, LLC.
Here’s what he said have been his biggest unexpected retirement costs to date.
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Home Maintenance and Healthcare
“When I retired, I encountered some unexpected expenses that significantly impacted my retirement lifestyle and budget,” said DePeralta. The two big ones were home maintenance and healthcare.
The cost of home maintenance varies widely. According to State Farm, however, it’s best to budget between 1% and 4% of your home value for annual maintenance costs. In the U.S., the average home sales price is $492,300. For a home valued at this amount, that means you should expect to spend anywhere from $4,923 to $19,692 a year on maintenance.
And when it comes to healthcare, it’s no secret that people in the United States have one of the highest financial burdens. According to CMS.gov, the average person spent about $13,493 on health-related costs in 2022, a 4.1% increase from 2021. Costs continue to rise, as well, making it harder to plan for these expenses.
Of course, everyone’s situation is different. Here’s what DePeralta said about the surprise expenses he’s had to deal with since retiring.
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Medical Bills and Prescription Expenses
“One big area was healthcare-related costs, particularly medical bills and prescription expenses,” said DePeralta. “The need for certain medications and treatments ended up costing me around $500 per month, which was more than I had initially budgeted for. This forced me to adjust my financial plan and allocate more funds towards healthcare, impacting the discretionary income available for leisure activities or travel.”
DePeralta’s story isn’t untypical, either. Even individuals who qualify for Medicare have to pay some costs out of pocket.
For example, the average premium for Medicare Part B is $174.70 a month. The exact cost depends on the individual’s income. Medicare enrollees also have to pay a $240 yearly deductible — and an additional $1,632 whenever they’re admitted to the hospital under Medicare Part A.
The cost of other services, such as treatments, preventative care and medication, vary widely based on the healthcare plan, whether the service is out-of-network and individual needs. However, the average out-of-pocket prescription medication cost for adults of any age is $177 a year — more for those ages 65 and up.
New Roof and HVAC System Replacements
The other big expense DePeralta’s been hit with during retirement is related to his home.
“Home maintenance and repairs also caught me off guard,” he said. “The necessity of a new roof and HVAC system repairs proved to be significant costs, totaling approximately $3,000 for the roof and $1,500 for the HVAC repairs.”
These unexpected expenses have had a direct impact on his retirement budget. “I had to reallocate funds from other areas to cover these essential home repairs, ultimately affecting the overall financial flexibility of my retirement lifestyle,” he said.
If you’re a homeowner, too, chances are you’ll end up facing similar costs throughout your life — and well into retirement. Even if you’ve paid off your mortgage, something many financial experts recommend doing before retiring, you’ll still need to consider things like utilities, insurance, taxes and repairs.
Certain things, like property taxes, can rise based on such factors as the perceived market value of your home. Homeowners’ insurance premiums may also increase due to inflation or based on other external factors — like environmental disasters or severe weather changes.
As for repairs and general maintenance, costs vary based on location, your home’s age, your appliances, square footage and more.
Preparing for These Expenses Is Key
“Unexpected expenses in retirement, especially in healthcare and home maintenance, can have a profound effect on one’s financial plan and lifestyle,” DePeralta said.
By anticipating and preparing for these costs as much as possible ahead of time, it’s easier to obtain that much-needed peace of mind and financial security in retirement.
Keeping in mind that your exact costs will be unique to you, here are a few other common — yet largely unexpected — expenses many retirees face and how to prepare for them:
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Long-term care: According to the U.S. Department of Health and Human Services, around 70% of people who are 65 and older will need long-term care for at least 3 years. The typical cost of a private room in a nursing home facility is $116,800 a year. In-home care costs $68,640 to $75,504 a year, depending on what you need. You can purchase a long-term care policy to offset these costs.
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Transportation: If you have a car, account for maintenance, fuel, insurance and depreciation. One way to combat this cost is to take public transportation or, if that’s not possible, to get a vehicle with low overall costs and a high safety and reliability rating.
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Emergencies: Life happens. Whether that’s an adult child coming to you who needs your help, a spouse passing away — and potentially lowering your household’s retirement income — or something else, costs can add up. Some ways to protect yourself include buying life insurance, investing in tax-advantaged retirement funds and building passive income streams.
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This article originally appeared on GOBankingRates.com: 2 Unexpected Expenses I’ve Been Slammed With in Retirement
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