Retirement is often seen as a time to relax, travel, and enjoy the fruits of your labour. However, managing your finances in retirement can come with its own set of challenges. While you may save money by cutting back on commuting, professional attire, or other work-related expenses, there are several unexpected costs that can sneak up on you. Being aware of these can help you better plan for a financially secure retirement.
1. Boomerang children
Many retirees today are finding that their adult children are returning home, or perhaps never moved out in the first place. Whether it’s because of rising rent prices, the cost of education, or other financial hurdles, “boomerang children” can add to your living expenses. Hosting your adult children means higher grocery, utility, and possibly even housing costs, especially if they are not able to contribute financially.
2. Helping your children financially
Even if your children are living independently, they may still need financial support. Weddings, university tuition, and housing deposits are just a few of the big-ticket items you might be asked to help fund. Rising property prices have made homeownership increasingly difficult for younger generations, and many retirees are finding themselves dipping into their savings or superannuation to help their children get a foothold in the property market.
While it’s natural to want to help your family, these expenses can significantly reduce your retirement nest egg, especially if you’ve already made plans for how much you can comfortably withdraw each year.
3. Caring for elderly parents
We’re living longer than ever before, and this means that many retirees find themselves in the position of caring for ageing parents. This care could range from financial support, like contributing to medical bills or hiring in-home assistance, to providing a place for them to live. Making modifications to your home to accommodate elderly parents or ensuring their home is equipped with senior-friendly features are additional expenses you may not have anticipated.
4. Divorce in retirement
Divorce rates among older couples are on the rise, and unfortunately, splitting up later in life can have significant financial consequences. Divorce settlements may require you to divide assets, which could mean parting with savings, investments, or even the family home. Rebuilding financially after a divorce is difficult, especially if you’re already in retirement and no longer earning an income. In some cases, retirees are forced to downsize their lifestyle or return to work to cover living expenses after a divorce.
5. High inflation
Even modest inflation can reduce the purchasing power of your savings over time. But when inflation surges – as it has in recent years – the impact on your retirement income can be much more severe. Costs of everyday necessities like groceries, utilities, and healthcare may rise faster than expected, and your investments might not keep pace. If your retirement budget was built on an assumption of lower inflation, this could require you to cut back or reconsider your spending priorities.
6. Unexpected medical expenses
Healthcare costs generally increase as we age. While you may be prepared for routine expenses like check-ups and medications, sudden medical emergencies can be costly and difficult to plan for. Whether it’s an accident, a chronic illness, or a major surgery, the financial impact of unexpected medical costs can be substantial, even with insurance. Additionally, out-of-pocket expenses for medical equipment, home modifications, or long-term care are often overlooked when planning for retirement.
7. Aged care costs
Even if you’ve made plans to stay in your own home as you age, circumstances can change. At some point, you may need to consider assisted living or a residential aged care facility. Government assistance can help cover some of the costs, but more premium facilities—especially those with private rooms, specialised care, and additional amenities can be quite expensive. These high-end options may require you to dip deeper into your retirement savings than you anticipated.
8. Home repairs and maintenance
While you might not have mortgage payments in retirement, you’re still responsible for maintaining your home. Repairs, renovations, and ongoing maintenance can quickly add up. From a broken water heater to roof repairs, home expenses often arise when you least expect them. It’s important to factor these costs into your retirement budget, especially if you plan to stay in your home for the long term.
Preparing for the unexpected
As you approach retirement, it’s important to create a financial plan that accounts for both routine and unexpected expenses. While you can’t predict every cost that might arise, being aware of these common surprise expenses will help you be better prepared. This may include building a financial buffer for emergencies, revisiting your investment strategy to account for inflation, or working with a financial planner to ensure your retirement savings can withstand unexpected costs.
By planning ahead, you can safeguard your financial future and enjoy your retirement with greater peace of mind. If you’re ready to take control of your retirement planning and prepare for the unexpected, our financial experts can help you build a strategy to fit your goals.
Chat with the team at APS Financial Planning.
Written by APS Senior Financial Advisor, Paul Hatzigeorgiadis.
Paul has over 25 years of experience in the financial services sector. Over Paul’s history, he has provided advice to an extensive range of clients from wealth accumulators to pre and post retirees advising them on Wealth Creation, Cash Flow Management, maximising Centrelink benefits in Retirement, Personal Insurances, Debt minimisation strategies and Superannuation. Paul is married with a 12-year-old daughter and enjoys spending time with family and friends. Whether it’s assisting clients to meet their short-term goals or working with them over a longer term, Paul enjoys helping guide his clients with their financial future.