Half of Retirees say that they wish they’d budgeted more for these expenses
You’re about as likely to guess how much money you’ll need for retirement as you are to predict exactly how long you’ll live. Yet in order to live comfortably in your senior years, you have to come up with estimates for both. You can generate an idea using the housing, food, insurance, and travel costs in your current budget, but what about things like medical emergencies, home repairs, and car breakdowns ?
You need to budget something for these expenses as well, but people often underestimate how much they’ll need. Approximately 56% of retirees said they wish they’d budgeted more for unplanned expenses, according to an Edward Jones survey. So how do you know how much you actually need ? Let’s take a look.
Retirees need an Emergency Fund
Everyone should have an emergency fund to help cover unexpected expenses, like those mentioned above, so they don’t have to take on debt or ruin their credit. Conventional advice for working adults is to save three to six months’ worth of income, but retirees will need a lot more than that.
It’s tricky to pinpoint exactly how much you need because you don’t know how many emergencies will arise in retirement or how much they’ll cost. Saving six to 12 months of your retirement living expenses is a good starting point, but some people may feel more secure saving a couple years of living expenses for emergencies. It’s up to you to decide what you’re comfortable with.
Just remember emergency funds are for actual unforeseen expenses, not ones you can budget for. If you’re nearing retirement and know the roof on your home will need replacing soon, you should include the cost of the new roof in your retirement budget separately, rather than drawing upon your emergency fund to cover these costs.
How to reduce your unplanned expenses
Maintaining adequate insurance coverage throughout your retirement can help reduce your out-of-pocket costs in the event
of an emergency. Medicare will cover a lot of your retirement healthcare costs once you turn 65, but if you retire before this, you’ll need to purchase your own health insurance or make sure you’re covered under a spouse’s policy.
You may also wish to purchase supplemental insurance coverage to cover what Medicare doesn’t. This could mean buying a Medicare supplement plan or a Medicare Advantage plan, also known as Medicare Part C plan. Medicare Advantage plans cover everything original Medicare covers, as well as some things it doesn’t. You could also consider vision and dental discount plans, which are not insurance but lower your out-of-pocket costs when you visit your dentist or eye doctor.
You should have appropriate auto and home or renters insurance as well. Life insurance or long-term care insurance is also worth considering if you believe there’s a chance you could one day require long-term care. This can exhaust even the largest emergency funds, so a long-term care policy or a life insurance policy with a long-term care rider can help you get the care you need without depleting your savings too quickly.
All these insurance policies will bring their own premiums, deductibles, and possibly copays, but these expenses are a little more predictable than what you could owe if you had to pay for all of your unplanned expenses out of pocket.
You always need a Plan B backup plan
Regardless of how great your insurance is or how large your emergency fund is, you need a backup plan for what you’ll do if you find yourself draining your retirement savings more quickly than you’d originally anticipated. Cutting your expenses may help make up for some of the shortfall, but this might not always be possible.
Returning to work, either part- or full-time, is another option if you’re still able to work. You don’t have to do what you did before. You could choose something that’s more in line with your own interests or start a side hustle that requires little work from you at all, like renting out an extra property, a parking space, or a storage facility.
This additional income can supplement your retirement savings, but remember, it’s not all yours to keep. If you’re self-employed, you must remember to set aside money for taxes so you don’t run into trouble with the IRS.
Homeowners could also consider tapping into their home equity or obtaining a Reverse Mortgage, but how much this will net you depends on the value of your home and how much equity you have in it. You could use this strategy in combination with the others above if you find you need more money than you can borrow, or you’d rather borrow as little as possible.
As you near retirement, your estimates of your expenses, including how much you’ll need for emergencies, could change from when you first created your retirement plan. So review your plan annually; and before you leave the workforce make sure you’re comfortable with the amount you’ve budgeted for emergencies. If not, you may need to delay retirement a little while longer, trim your retirement expenses or consider a small part-time job.
My name is Fraser Allport
I have been Self-Employed in
Financial Services for 40 Years.
I work for me, and for You.
My allegiance is to You.
Not some Big Company or Big Bank.
I am an Independent who runs my own Company, so I can search the world to find you The Best Ideas … for The Least Cost.
I am a Fiduciary, Investment Advisor, and Certified Estate Planner™ who specializes in the FRS DROP Plan, Social Security, Medicare, Income Taxes, and Estate Planning.
I have been in Financial Services for 40 Years.
I will be here when You need me.
All of Fraser’s prior DROP articles are archived at :
Fraser is a Certified Estate Planner™
See Fraser's Estate Planning services at :
Fraser's Biography, Services, and Credentials are at :
Follow Money and Markets at :
Client references are available for you to speak with upon request.
With 40 Years of Knowledge in Financial Services,
Fraser Allport can help you with all your DROP, Medicare,
and Social Security Questions.
It is Too Late in Your Life to make Money Mistakes !
Be A Good Steward of Your Money.
Call Fraser, a Financial Professional with 40 Years of Experience.
You call a Professional for every other project in Your Life, right ?
Please see Fraser’s invitation for a Complimentary Consultation to help you start your Exit Plan to Retirement.
Starting any Project is the hard part, but Fraser can help shepherd you with a Plan of Action.
Fraser Allport is a Fiduciary, an Investment Advisor,
and a Certified Estate Planner ™ with 40 years of experience.
Fraser is an Independent, and the Owner.
Call Fraser Allport, your Florida DROP Specialist, at 386.882.6256 for your Complimentary Consultation
about your DROP, Social Security, Medicare, Income Tax, Retirement and Estate Planning questions.
Knowledgeable in every aspect of Financial Services, Fraser is the Total Advisor ™.
An Experienced and Independent Fiduciary for all your financial needs.
Call Fraser for answers at 386.882.6256.
It’s a Complimentary Consultation.
Please see all of Fraser’s DROP articles in his extensive DROP Library at.
Fraser can help you with an ACTION PLAN
below for Retirement :
- Fraser can help you with the very first steps that you must take to exit your DROP.
- Fraser can help you meet the dates and deadlines for filing your DROP Exit forms.
- Fraser can help you determine what forms are needed, and help you complete them.
- Fraser can help you with choices for wisely investing your DROP Rollover money.
- Fraser can help you optimize your un-used DROP Sick Days and Vacation Days.
- Fraser can help you maximize your Social Security benefits for you and also for your Spouse. Note: Social Security decisions are irrevocable after 12 months.
- Fraser can help you with your Health Insurance, Medicare, Medicare Supplements Home and Long Term Care choices. Most Long-Term Care occurs in your Home.
- Fraser can help you coordinate your Retirement Plans with your Spouse’s Retirement Plans. You and your Spouse want to be in synch about Retirement.
- Fraser can help you reduce your Income Taxes in Retirement. This may save you a lot of money over the rest of your Life. Don’t over-pay your Income Taxes. What a waste of Money.
- Fraser can help you with your Estate and Legacy Planning. Fraser is a Certified Estate Planner™. Leave A Legacy, not A Mess. This is a moral as well as a Financial responsibility.
- Fraser can help you Get Your House In Order with Wills, Trusts, Powers of Attorney, A Living Will, Health Care Directives, Final Expenses, etc.
- Fraser can help you with a Home Health Care Plan, customized for you. Act now, while your health still qualifies. Home Health Care is the future of Long Term Care.
Your DROP Plan is your Retirement Nest Egg.
Safeguard it by getting Smart with your Money.
Remember the two Golden Rules of Investing:
1) Don’t Go It Alone. Seek out Professional help.
2) It’s Never Too Early to Plan for Retirement.
These are Big Decisions for You ... with really Big Consequences.
As You Retire, You are about to make some of the most important
financial decisions of Your entire Life :
What to do with Your DROP Lump Sum
Be Smart with Your Money, because it’s Your Nest Egg.
Your Retirement is at stake here. These are Lifetime decisions.
Prepare for Retirement ...
and prepare for Longevity.
Because of his Knowledge and Experience for 40 Years ...
Fraser Allport is ... " The Total Advisor™ "