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Some kinds of surprises are more delightful than others — like finding a little extra in your bank account or your favorite barista offering you the last flaky croissant of the day so they don’t have to toss it. Then there are the surprises you don’t want, like realizing that the appointment you had wasn’t tomorrow — it was today. Like right now. But one of the worst surprises you could get is finding out you don’t have the savings you need for a stable retirement.
Financial advisors are in the business of developing financial plans that nip those kinds of surprises in the bud (well, you’re on your own about the appointment). They’ve seen their clients deal with sudden roadblocks to a happy and comfortable life in retirement, and some surprises are more common than others.
GOBankingRates chatted with several advisors to learn more about the challenges they see most often and what you can do to avoid them.
Expenses Don’t Go Down
It’s tempting to imagine that time freezes the moment you retire, including the prices of everything. Well, the famed singer Stevie Nicks might’ve been right when she said, “time casts a spell on you,” but one thing time does not do is lock prices in place once you leave the workforce.
According to Melissa Cox, CFP, owner of Future-Focused Wealth, one of the biggest surprises for retirees is the need to budget for higher prices as time goes on.
“Expenses don’t magically go down. People think they’ll spend less because they’re not commuting or buying work clothes, but that’s rarely how it plays out. Let’s not forget the convenience factor of Amazon Prime,” she said.
Cox also notes that retirees must monitor their spending habits just as closely as they did when they were working — arguably, even more so. Think healthcare costs, home repairs, travel, and support for adult kids or even grandkids.
“A lot of retirees end up spending just as much, or even more … it just shifts to different buckets,” she added.
Healthcare Costs Increase
Many retirees believe that because they’re active and healthy, they don’t need to worry much about healthcare expenses. Besides, won’t Medicare pay for everything anyway? In reality, healthcare costs are one of the biggest expenses retirees face, and Medicare coverage is far from comprehensive.
Neal Gordon, ChFC, RICP, CRPC, founder and CEO of Gordon Wealth Planning, said that one of the biggest surprises retirees confront is just how expensive healthcare can be.
“Most assume that Medicare will cover everything, but it doesn’t. Dental, vision, hearing aids, and long-term care can be a nasty shock,” he said. “Even healthy couples can spend over $300,000 on healthcare in retirement, and that’s not including nursing home or in-home care costs.”
Infighting Caused by a Lack of an Estate Plan
You may imagine all of your loved ones getting along smoothly when making decisions about your assets or your care. Unfortunately, without an estate plan, things can get complicated fast.
“Countless times, people encounter financial and legal challenges due to their loved ones not regularly updating their estate plans or failing to leave behind sufficient information to access important documents,” said Howard Enders, COO of The Estate Registry. “Failing to create or even regularly update an estate plan is a common mistake individuals make as they reach retirement.”
His advice to avoid this surprise? Create your estate plan now and update it regularly — at least once a year. Today’s digital estate-planning tools can help you organize and safeguard your assets and documents in a central, easy-to-access location, making reviews far less burdensome.
Bottom Line
Retirement should be a time to enjoy the rewards of your hard work — not a time for financial shocks. Protect yourself by planning ahead for ongoing expenses, factoring in healthcare costs, and putting an estate plan in place, and you’ll be in a much stronger position to sidestep unwelcome surprises and focus on what really matters: enjoying your retirement.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.