Financially Preparing for Unexpected Retirement Expenses

The following article is by Kristi Muse, our staff writer. She is a great freelance writer, blogger, police officer’s wife, and stay at home mom of two.

Financially Preparing for Unexpected Retirement ExpensesMy uncle is in his late 50s and should have a long life still to live ahead of him. That’s what my whole family believed at least, until he was diagnosed with an aggressive form of prostate cancer last week. One day he was fine, and the next the doctor is telling him his options.

Seeing this happening to a beloved member of my family really drove the point home for me that none of us know what life will throw our way or when it will throw it. By embracing that fact early on, we may be able to lessen the blow by being as financially prepared as possible to deal with the fallout.

We don’t know what medical bills we may have looming, what funerals we may have to attend sooner than expected, and what unexpected costs of living we may have to take on. The only way to truly prepare for retirement expenses is to financially prepare for the unexpected.

Medical bills

My uncle and aunt are now facing massive medical bills and the terrifying prospect of what lies ahead. They are both still working, and they will have to drain what little they have in savings to help cover the costs of his care. Although the price of health care has risen at its slowest rate since 1965, the future costs of healthcare are still unstable and unpredictable. As they move forward in his treatment, they aren’t entirely sure what to expect from the insurance companies.

Just as is the case with my uncle, as you get older, you may need to visit doctors more frequently, pay more doctor co-pays, deal with higher prescription costs, and find a way to accommodate for the massive medical bills.

Outsourcing tasks

In retirement, you may need to outsource tasks that you used to be healthy enough to handle yourself. Tasks such as mowing the lawn, cleaning gutters, and repairing your home will eventually have to be outsourced to someone younger and better able to handle the physical strain of the task.


To be truly ready for retirement, you need to save enough money to cover your living expenses in an economy with a historically rising cost of living. You might have enough saved to retire in today’s economy, but thirty years from now, it may not be enough.

For example, The Economic Research Service writes, “In 2016, ERS predicts supermarket prices to rise 2.0 to 3.0 percent—a rate of inflation that remains in line with the historical average.” With rising food prices as just one prime example, you might not have enough to live comfortably if you don’t account for how inflation will affect your daily cost of living.

Falling prey to financial scams

Since you happen to be reading this post on a financial independence blog, you’re probably in the clear from falling for a money scam, but no one is immune. It’s only too easy to think, “That will never happen to me.” Unfortunately though, 1 in 5 senior citizens will fall for a financial fraud scheme. Even if you’re a long way off from becoming a senior citizen, it’s important to always be on the lookout for financial scams.

Medically retrofitting your home or moving

As you get older, or if you get sick, your home may need to be medically retrofitted to accommodate your needs. For example, you might have to install a walk in shower or bath tub, or your home may need to become wheelchair-accessible.  Try to put money now into an emergency home repair savings account, to budget for medical construction changes in retirement.

If the necessary changes are too much to handle, you may also be facing a move during retirement. Make sure you save enough disposable income for retirement that you would be able to comfortably pay for the move.

Travel for Important life events

Graduations, weddings, births, and funerals are all events which usually require at least some travel expenses. Save enough now so that you are able to afford the travel to participate with your loved ones in life’s most important events.

Save as much as you can

While you should try to find ways to enjoy your money now, you should also generously save for your retirement. Since you won’t ever be able to plan for every money contingency, the more you save, the better. You never know what will happen in life or if you’ll have enough in your accounts to handle the financial burdens.

If you want to live comfortably through retirement, try to save, “10% to 12% of your income,” according to USA Today. If you aren’t sure how much you should aim to save, use a retirement calculator to see if your current savings and contributions will be enough.

How are you planning for unexpected retirement costs?

Image credit: by socarra

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23 thoughts on “Financially Preparing for Unexpected Retirement Expenses”

  1. Such a balance between enjoying your money now and saving. I think J$ on his blog put up a post that had a link to a sort of morbid app that showed the probability of when you might die based on your age. It was eye opening! It makes you wonder what your saving so hard for if you can’t enjoy it . . . but also made you remember that you could live until your 95 and that money will become necessary. Striking the balance!


  2. Great article. Sometimes we forget the realities of unexpected sickness. It’s scary to think of the medical costs that can ruin a person financially. I once met a breast cancer survivor that said her benefits covered all her medical costs to help her conquer cancer…she said that insurance covered about $600K. You don’t mention if your uncle is retired or if he has or does not have medical insurance. Why is he having to pay so much money out of pocket? Does he not have insurance or does the type of insurance he has not cover certain things? I think info like this will be helpful for people to know so they can plan ahead.

    • It really is scary what medical disasters can do to families.

      To answer your question, he isn’t retired. He works as a bus driver. I’m not sure of the exact plan, but he doesn’t have full or comprehensive medical benefits. He was never able to go to school, and he and my aunt struggled tremendously with their finances due to a really nasty custody battle she was in for her kids from her first marriage.

  3. I always look to my parents to see what I am in store for. As we discussed my 104 year old grandma who is in a nursing home, my concern for them was their plans to pay for long term nursing home care. They have more than enough money for retirement, but living in a nursing home could wipe out a large portion of their savings.

    • Again, I’m so sorry to hear of your grandma. I’m glad that she will be well cared for, but it is pretty frustrating for your parents, I’m sure. To have saved diligently for retirement for themselves but to have to need to use it for care for family is a difficult situation.

  4. Even though I have achieved FI I will continue to work because I like keeping involved. My “old paycheck” has been successfully converted to a “playcheck” and I have created a long list of adventures for me and my family. My home is paid off and the equity will serve as a hedge against any unexpected events. My only concern is time on the clock and my health.

  5. We tried to be smart about those future “unexpected” expenses by predicting what we could and keeping a large enough buffer on hand to cover the unknown unknowns (to borrow a phrase from the Other Donald – Donald Rumsfeld).

    Medical care is the largest unknown and we have a $60,000-ish Health Savings account that we don’t touch right now in our 30’s. That should roughly double every 10 years, so by the time we’re in the high-health spending years of our 50’s, 60’s and beyond, it should be a quarter million or more (depending on emergencies that crop up between now and then, of course). So far, I’ve been impressed with the Medicare coverage my father in law has. A half million dollar surgery and hospital stay will end up costing him a few thousand dollars out of pocket, and that’s with just the basic Medicare that’s $110 per month (comes out of his small SS check).

    Otherwise, we have budgeted for major house repairs/replacement items, car replacement, replacing furniture and other large consumer items.

    If some disability arises, we’ll probably be vacationing less so the vacation budget can be redirected to accommodative housing and transportation mods as necessary.

    We’ll see how the next several decades go! 🙂

  6. I guess my plan is to continue to LBYM during retirement, meaning if the safe withdrawal rate is 3%, I plan on spending 2% and will leave the rest in a permanent emergency fund. Is this enough? Unexpected can mean a wide range of amounts. I decided not to buy LTC insurance so this EF will have to cover that. I’m still thinking about longevity insurance, which as you aptly point out would be a great problem to have, although I doubt it’s fun to live through if you’re unprepared.

    By my calculations “10-12%” of after-tax income isn’t enough to replace the spending power of your wage income if you don’t have a pension. Assuming your wages are flat after inflation, an inflation-adjusted portfolio return of 6% per annum, and a 3% safe withdrawal rate, you’d need to set aside 20% of your after-tax income in order to annually withdraw 50% of your final-year income after 30 years. So if social security replaces 30%, your annual spending afterwards would be 80% of the income from your last year of work, which matches what you spent before retiring. With these assumptions 12% would require a 40-year work time horizon.

    • 20% is absolutely a better number, no question, but one that isn’t easily achievable for many families in our country. No one number or average will ever apply to everyone. You need to look at your income, living expenses, and amount currently saved to see if your current retirement savings plan will be enough.

  7. We recently retired and no one ever mentions that your Medicare insurance DOES NOT cover you outside of the United States!! People always talk about traveling when you retire but I recently came back from a 3 week Italy trip. Senior tour groups everywhere! In Italy you often find no elevator or step to see many beautiful buildings. My suggestion is to travel BEFORE you retire to enjoy many places. Often later you don’t feel like traveling much either.

    • That’s a great point. International travel gets more and more difficult as you age. You also don’t want to be stuck with a monstrous medical bill if you get sick while abroad.

  8. Protecting yourself from scams isn’t just a matter of avoiding Nigerian princes and not giving out your password over the phone. You have to run your retirement like a business, with all of the appropriate safety controls. If you give a caregiver a credit card to buy things for you at the store, you cannot also delegate to that person the task of sorting the mail, checking the bank balances, and paying the bills. Many people have never run a business before, so this scam will be common, and may also go unreported or undiscovered.

  9. The best way to plan for unexpected retirement costs is to have a large retirement nest egg, which is attained by saving more money than 95 percent of people save (10 or 12 percent is way too little). I often recommend the book “You’re Broke Because You Want to Be” by Larry Wingate to people who have saved little money over the years. Unfortunately, the people who most need to follow the principles in the book will be most resistant to the principles. They have this 3D vision — denial, distortion, and delusion — that makes them the way they are .

    Here are the two primary reasons that many Americans and Canadians, whether married or single, have not saved that much for retirement.

    1. Immediate gratification takes too long.
    2. A “necessity” is any luxury that the neighbor happens to have.

    Fact is, the vast majority of things that people think are needs (including cell phones, latest technology, large homes, etc.) are merely wants. To hold your expectations in check, you must understand that you have few real needs. You are a creation mainly of wants and only of a few needs. In fact, all your needs (necessities) have always been provided for you in your life so far. Plain and simple, if they weren’t — you would be dead!

    In short, if you get control of your wants and just succumb to your real needs, it’s not all that hard to save a nice nest egg that can handle most of unexpected retirement expenses.

    • Saving for retirement isn’t always as easy as cutting out wants. Having been in a place where we were barely surviving and didn’t even have enough for our needs, I understand why so many people are woefully unprepared for retirement. When you and your spouse both are working two jobs, and don’t even have enough money to keep food on the table, it’s not about living flippantly and only taking care of wants. It’s about survival at the most basic level and not having any wants at all. Saving 10-12% isn’t enough, but sometimes even saving just that small amount could prevent your from having enough money to even get to work for another week’s paycheck.

  10. Hi Kristi,
    Great List, and exemplifies a lot of items that go ignored by early retirees. The greatest defense against “the unknown” is to mitigate risk to the greatest degree possible. That is a matter of clean eating, regular exercise, periodic checkups, and comprehensive insurance. Things like inflation and travel aren’t very big considerations, in my opinion, given that inflation should impact asset prices as well, and travel is largely discretionary.

    Thanks for the post.


    • I agree, early retirees can sometimes be nearsighted in their goals. Staying as healthy as possible definitely helps, but we all need to prepare as best we can for dire situations that may or may not affect us down the road.


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