Retirement Planning: Don’t Let Unexpected Expenses Derail Your Golden Years
When you finally stop working, you expect to enjoy the fruits of your labor. However, unexpected challenges can arise, threatening to disrupt your retirement plans. According to Charles Schwab, there are five common retirement surprises that can catch older workers off guard.
The High Cost of Home Repairs
One of the most common surprises is the need for unexpected home repairs. Whether it’s a new roof, furnace, or air-conditioner, these expenses can quickly add up. Experts recommend setting aside 1% to 2% of your home’s current value for annual maintenance and repairs. Additionally, consider budgeting for improvements that can help you age in place, such as wheelchair access and ergonomic door handles.
Healthcare Expenses: The Single Biggest Line Item
Healthcare is a significant expense in retirement, and Medicare may not cover everything. You’ll still face prescription costs, co-pays, and expenses for dental, vision, and hearing care. Consider budgeting between $450 and $850 per month for each person, including insurance premiums and out-of-pocket costs. Opening a health savings account (HSA) can also help you save for eligible healthcare expenses.
The Cost of Extended Care
As you age, the cost of extended care can be staggering. A private room in a nursing home can cost over $100,000 per year, while a home care aide can cost around $50,000. Medicare doesn’t cover long-term care, and Medicaid assistance is only available after retirees spend down their assets. Consider purchasing long-term care insurance or adding a long-term care rider to a whole life insurance policy or annuity.
Helping Family Members
It’s natural to want to help family members in need, but it’s essential to set clear limits and consider the impact on your retirement assets. If you expect to be repaid, structure the loan with a written agreement. Remember that gift taxes apply to any amount over $17,000 made in one year.
The Financial Implications of Losing a Life Partner
Losing a life partner can have significant financial implications. To prepare, put together a financial plan that includes the loss of either spouse, along with an up-to-date will, power of attorney, and healthcare power of attorney. Consider insurance to cover final costs and the loss of income, as well as structuring pension payments to continue after the pension recipient passes on.
Protecting Your Retirement Assets
Once you’ve stopped earning income, protecting your retirement assets is crucial. Consider working with a financial advisor to create or update a retirement plan that includes healthcare expenses, estate planning, insurance, tax considerations, and more. With careful planning, you can enjoy your golden years without worrying about unexpected expenses.
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