Be Prepared: 5 Common Unexpected Expenses in Retirement

There are some basic rules of thumb that guide people in retirement planning. For example, on average, about one-third of expenses in retirement are for housing; about 40 percent are for food, healthcare, and transportation; and the rest goes to insurance costs, clothing, and discretionary spending. However, retirement planning is largely a personal matter; everyone goes into the post-work years in different circumstances and with different priorities.

What's more, we're realtors, not financial planners or CPAs, so we don't want to hand out any sort of serious financial advice. Still, as active adults ourselves, and having lots of friends, family, and clients in their retirement years, we've seen too many people get derailed from their plans due to expenses they didn't see coming (but could have).

We recommend everyone work with a qualified professional to make smart savings and budgeting plans for their retirement years. And hopefully, they'll guide you in planning for those unexpected costs that so often sneak up on people. But there's no substitute for going into things well informed, so here's a quick look at five of the more common expenses people don't always account for in retirement.

Unforeseen Medical Expenses
A lot of your healthcare expenses, like prescription costs and checkup copays, are predictable. But as you age, diagnostic testing, major dental work, surgery, physical therapy or other rehabilitation, hospitalization, and other medical care become more likely and can come with considerable out-of-pocket expenses. Keep in mind that changes to Medicare or other health plans could affect you, too. Also, nursing care for you, your partner, or an elderly parent-whether temporary at-home help or full-time care at a special facility-often becomes a necessity.

Taxes
Who could forget about taxes? You might be surprised how many people neglect to think about what they'll have to fork over to Uncle Sam when they start withdrawing from their 401(k)s, IRAs, or other retirement accounts. Taxes on retirement funds and income can range from around 10 percent to as much as about 40 percent. And also remember that in 10 years, your money won't be going as far due to inflation.

The Children and Grandchildren
You may be long since done raising kids, but as you know, you're never done being a parent. Or a grandparent. It's not uncommon for retirement-aged folks to be hit up for money for things like their grandchildren's college education or their adult children's overdue major home repairs. Or an adult child or spouse could face a layoff or serious money problems and you'll want to help.

Maintenance or Replacement Costs
Speaking of home repairs, sometimes you have to spring for them yourself in the retirement years. Then there's vehicle maintenance, or possibly the need for a new car at some point. These sorts of expenses don't usually come along often, but they can be significant when they do. One recommended approach is to put away 10 percent of your home and your car's value each year for these costs; that way, there's a good chance you'll have a designated emergency fund should you ever need it.

Travel
This is generally lumped in with "discretionary spending," and for many, travel is a big part of their plans for the active adult years. But plenty of people are unprepared for the major lifestyle change and huge increase in free time when they stop working, and they desperately wish they had more freedom to travel than they anticipated. Also, think about family-related travel. How far will you have to go to visit your children and grandchildren? How often will you want to see them? Or maybe you'll want to help them with the cost of coming to you.