4 Things Retirees Underestimate

When people plan their retirements, they carefully plan everything from monthly bills to housing, food, and health insurance. But there are other expenses which may take you by surprise. Additionally, most retirees don’t budget enough – or at all – for things like travel, medical care, and grandchildren. We have detailed below the four costs that retirees underestimate most commonly.

1. Inflation
A dollar today isn’t worth what it was 20 years ago, and in 20 years, it won’t be worth what it is today. Many retirees think of things in terms of today’s dollar.

Most planners use a 2 percent per year guide, but to really drive home what a difference inflation makes, perhaps look back at what a dollar today could buy in 1980, 1990, 2000, and 2010 to see how much it’s eroded. Now, adjust your savings plan according to what you’ll need in 2040, not 2020.

2. Cost of living after a spouse’s death
When a spouse dies, especially if that spouse was earning a pension, the surviving spouse’s incoming money may be substantially cut down. Instead of a full pension and two Social Security benefits providing income, the surviving spouse could be left with a pension’s survivor benefit and one Social Security income. A solid retirement plan must include plans detailing how to fund retirement for a surviving spouse.

3. Children (and grandchildren)
Just because your kids have moved out and moved on with their lives doesn’t mean they won’t ask you for money—for themselves or their kids. Of course you anticipate the best, but the unexpected does happen. A child might get divorced and ask for help to make ends meet. A grandchild’s school tuition might be greater than a budget allows. It’s not uncommon for retired parents to go so far as to take out their mortgages to help their kids buy homes. In these situations, it may be difficult to say no to children and grandchildren. This is why it’s important to leave room in your family’s budget for unexpected expenses when planning for retirement.

4. Budgets
The last big mistake is retirees spending more than they can afford, especially early on in retirement. Some retirees have a difficult time living with how rigid they must be in sticking to their plan. Not only can this jeopardize future income, but it can also create mental distress. Making a plan—and sticking to that plan—eases that stress and ensures that you’ll have enough to see you through the end of your golden years.