11 Huge Retirement Costs That Are Often Overlooked

Shocked senior man
kurhan / Shutterstock.com

When you retire, you will have some major expenses. Do you know what they are?

Food, groceries and utilities will probably take their fair share of your budget, as they did during your working years. But what are you missing?

Following are some retirement costs that people often forget to figure into their financial calculations — along with an idea of how much they might cost you during your golden years.

1. Health insurance

Monkey Business Images / Shutterstock.com

You’ll have Medicare in retirement, so you don’t need to worry about health insurance, right? Not exactly.

First, if you retire early, you’ll need to buy your own health care coverage for a few years. Unless you qualify because of a disability, you won’t be eligible for Medicare — the federal health insurance program primarily reserved for seniors — until you’re 65.

Next, Medicare doesn’t mean totally free health care, as we’ve detailed in stories like “5 Common Medical Expenses That Medicare Won’t Pay For.”

In fact, for many Medicare recipients, recurring costs like premiums and deductibles tend to rise each year.

Some seniors have the option to buy a supplemental Medicare health insurance plan, also known as a Medigap policy, to cover some out-of-pocket costs. But even if it saves you more money than it costs you, a Medigap policy is still an expense in itself.

How much this retirement expense costs: U.S. households led by someone who is age 65 or older spent $6,833 on health care in 2019, on average, according to the Bureau of Labor Statistics.

2. Long-term care

BlurryMe / Shutterstock.com

Long-term care is among the expenses that Medicare generally does not cover.

Another federal health insurance program, Medicaid, does cover long-term care, but you must meet specific requirements to be eligible for Medicaid.

So, unless you had the foresight to purchase a long-term care insurance policy — not cheap in and of itself — you might have to cover the cost of long-term care yourself if you need it.

How much this retirement expense costs: National median costs range from $1,603 per month for adult day health care at a community or assisted living facility, to $8,821 per month for a private room at a nursing home, according to the latest annual Genworth Cost of Care Survey.

3. Home renovations

Daisy Daisy / Shutterstock.com

About one-third of adult homeowners expect their homes to need significant updates to enable them to keep living there throughout retirement, a 2018 AARP survey found.

Known as “aging in place,” this practice brings its own set of costs. Doorways may need to be widened, a bedroom added to the main floor or a bathroom renovated to accommodate the limited mobility that often comes with advanced age.

How much this retirement expense costs: Cost vary widely, depending on the project and its extent. We examine the costs of some projects in “5 Home Improvements That Help You ‘Age in Place’.”

4. Federal income taxes

Jim Barber / Shutterstock.com

Federal income taxes are not necessarily an expense that ends when your working years end.

If your income drops when you retire, your taxes likely will drop, too. But that doesn’t mean your federal income tax bill will fall to $0.

There are some types of retirement income that Uncle Sam generally cannot touch, as we detail in “Retirees Can Dodge Taxes on These 9 Types of Income.” But other types of retirement income — including withdrawals from traditional retirement plans — often are taxable.

Even Social Security retirement benefits are taxable in certain situations. About half of retiree households do owe taxes on a portion of their Social Security benefits, according to a recent survey from the Senior Citizens League.

How much this retirement expense costs: U.S. households led by someone age 65 or older paid $5,063 in federal income taxes in 2019, on average, according to the Bureau of Labor Statistics.

5. State income taxes

Seniors working on taxes
Dragon Images / Shutterstock.com

As with federal income taxes, state income taxes don’t necessarily stop when you stop working. And if you live in an area that levies local income taxes, those won’t necessarily stop, either.

For example, some states tax Social Security benefits, and many states tax certain other types of retirement income to some extent. You can learn more about your particular state in “How All 50 States Tax Your Retirement Income.”

How much this retirement expense costs: U.S. households led by someone age 65 or older paid $1,107 in state and local income taxes in 2019, on average, according to the Bureau of Labor Statistics.

6. Transportation

Woman at wheel of car.
T-Design / Shutterstock.com

If you’re not driving to work every day, you may not even get in your car for days at a time. This is good if you have a paid-off car that is in good condition and has minimal wear and tear. But if you drive an older model or you’re still making payments on your car, owning a car can become an expensive investment for a retiree.

If you were once a two-car family, it might be time to sell one and pocket the cash. Even if the car is paid off, you’ll save on insurance and other ongoing costs. Or, depending on where you live, you could start using public transportation and ditch driving altogether.

How much this retirement expense costs: U.S. households led by someone age 65 or older spent $7,492 on transportation costs in 2019, on average, according to the Bureau of Labor Statistics.

That amount includes $2,792 for vehicle purchases, $1,383 for fuel and motor oil, $1,180 for insurance and $735 for maintenance and repairs.

7. Travel

Group of seniors at the beach.
JPC-PROD / Shutterstock.com

While having the free time to travel is one of the best retirement perks, that travel can come at a cost — even after taking advantage of the senior discounts.

For other ways to lower your costs, check out “18 Ways Save on Every Kind of Travel.”

How much this retirement expense costs: Late in 2019, baby boomers said they expected to take three or four domestic trips and one or two abroad — and to spend more than $7,800 on travel — in 2020, according to an AARP travel survey. Of course, the pandemic likely changed those plans dramatically.

8. Needy adult children

Monkey Business Images / Shutterstock.com

Beware the dreaded boomerang kids! Much has been written about adult children returning home to roost, but that shouldn’t be your only concern.

No, you also have to worry about children who might ask you to co-sign loans and then bail on the payments, leaving you to hold the bill. Or they may need your money to pay their rent, student loans, phone bills or any of dozens of other possible expenses.

What this retirement expense costs: Costs can vary widely, depending on how many children you have, their financial situations and your willingness to say “no.”

The good news is that you can avoid this expense entirely by saying no or choosing cost-free ways to help children who are struggling financially — see “6 Ways to Help Adult Children Without Going Broke.”

9. Entertainment

Monkey Business Images / Shutterstock.com

The more free time you have, the more you’ll be able to indulge in entertainment.

Shows like musicals, plays and other live performances don’t come cheap. Consider buying a theater season pass or buying tickets to small, local theaters rather than larger ones. You’ll not only support local art but you’ll also likely save some money.

If you’re into watching more live sports in retirement, consider watching local, regional or school teams, rather than professional sports teams.

How much this retirement expense costs: U.S. households led by someone age 65 or older spent $2,381 on entertainment in 2019, on average, according to the Bureau of Labor Statistics. But that spending category includes pets, which accounted for $563 of that total.

10. Inflation

Inflation
GTbov / Shutterstock.com

This isn’t something you can pencil into your budget as a line item, but inflation can’t be ignored. It’s tempting to do so, though, since the U.S. has spent the past decade in a low-inflation environment.

However, you have to plan for what the next 10, 20 or 30 years will bring. Heaven forbid we return to the age of double-digit inflation rates, which were last seen in the early 1980s, but that’s always a possibility.

Rising inflation has the potential to erode your money’s purchasing power and push up the cost of everything you buy — from food to rent to travel. Just take a look at “11 Everyday Items You Once Could Buy for Less Than $1.”

How much this retirement expense costs: Again, no one knows for sure where inflation will go in the future. What we do know is that it ran to 2.3% in 2019, the highest increase since 2011.

11. A long life

Monkey Business Images / Shutterstock.com

People are living much longer than they used to. A long life means extended opportunities to enjoy friends, family and hobbies, but it also compounds all the expenses detailed in this story.

Most notably, it gives inflation more time to eat away at the value of retirement savings and means more years covering health care expenses.

There is no way to eliminate most of these expenses in retirement, but there also is no reason to get blindsided. Work these costs into your financial plan so you’ll be ready for whatever may come.

How much this retirement expense costs: The cost of living a long life is even more difficult to predict than inflation. It is directly tied to how long you live, which depends on various aspects of your health.

To give you an idea, though, the Social Security Administration provides these averages:

  • A man turning 65 today can expect to live to age 84.
  • A woman turning 65 today can expect to live to age 86.6.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Free Tools for Saving More Money at Amazon
7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

7 Things I Never Buy at Costco
7 Things I Never Buy at Costco

A bulk buy isn’t always the best buy.

8 Reasons Your Parents Had an Easier Retirement Than You Will
8 Reasons Your Parents Had an Easier Retirement Than You Will

Here’s why the last decades of life are harder now than they used to be.

The 3 Worst Money Mistakes You Are Making at the Gas Station
The 3 Worst Money Mistakes You Are Making at the Gas Station

Beware these cash-guzzling missteps when you stop at any gas station.

13 Small Gadgets Under $20 That Make Life Better
13 Small Gadgets Under $20 That Make Life Better

These inexpensive electronics will make your day-to-day life a little easier — and happier.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

11 Products Now in Short Supply Due to the Pandemic
11 Products Now in Short Supply Due to the Pandemic

Many goods we take for granted have become tough to find in 2021.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

9 Millionaires and Billionaires With Surprisingly Frugal Habits
9 Millionaires and Billionaires With Surprisingly Frugal Habits

Some of the world’s richest women and men drive modest cars, clip coupons and love a bargain.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.