3 of the Biggest Financial Surprises in Retirement

Key Points

• The rising cost of healthcare can catch retirees off guard.

• One goal is to ensure savings and investments keep pace with inflation -- at the very least.

• An emergency savings account may be even more important in retirement than it was when you were working.

• The $23,760 Social Security bonus most retirees completely overlook ›

You've done everything right. You studied the Social Security benefits formula to determine when you were eligible. You contributed a specific percentage of your monthly income to a retirement account and read up on the best ways to ensure you'll be ready when retirement rolls around.

And yet here you are, standing in nearly a foot of water in your basement. You've been retired for a few months when a big storm hits, your sump pump decides it's time to die, and your basement becomes a wading pool.

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Despite doing everything right, you find yourself facing a surprise expense. If there's one important thing to know about financial surprises in retirement, it's this: They will happen. No matter how well you plan, something will surely slip through the cracks of your busy life.

The following list of the most common financial surprises in retirement won't prevent bad things from happening, but they can help you prepare.

Image source: Getty Images.

1. Healthcare costs

Until you're ready to apply for Medicare, you may not know that Part B, which covers doctors' visits, preventive care, outpatient medical services, and medical supplies, costs most enrollees $185 per month. That amount is expected to rise by 11% in 2026, to $206.50.

Unless your income and assets are low enough to qualify for Medicaid, a Medicare Savings Program, or you're enrolled in a Medicare Advantage plan that rebates your entire payment, you'll need to add an extra $206.50 (or $413 if you're married and your spouse also has Part B) into your monthly budget. And that's just Part B. If you want dental coverage but find the Medicare version stingy, you may also spring for a supplement or a dental discount program.

While this statistic has been thrown around so often now that it seems to have lost all meaning, the Bureau of Labor Statistics estimates that at age 65, the annual out-of-pocket healthcare cost is nearly $6,500 per person. What's more, 56% of those surveyed by RBC Wealth Management admit they haven't factored the cost of healthcare into their financial plans.

No matter how healthy you are, surprises can arise. For example, you could be skiing, break a leg, and require surgery, or you might be running with the bulls in Pamplona and get, well…gored. The point is, it's impossible to say that you'll never need more than basic medical care. If you do, that's great for you, but if not, medical costs can put a real damper on your retirement plans.

Since you can't see the future, your best bet may be to pay your Medicare premiums, plus the most supplemental coverage you can afford. Doing so can help blunt the impact of high medical bills.

2. Family crises

Nothing is closer to your heart than family, and if anything should happen to any of them, it could be expensive. Imagine these three scenarios:

A. Your spouse dies, leaving you alone to pay the bills.

B. A favorite aunt passes away in another country. You can't stand the thought of missing her funeral, but money is tight.

C. Your adult child calls, saying their spouse has left them and they need to move into your home with their children.

You can do two things to prepare for scenario A. To ensure you can get by solely on the income you earn each month, build a post-retirement budget before leaving the job. As you would with any budget, list your expenses. Once you've added those together, compare the number with the money you'll bring in on your own, including Social Security, pension, retirement account withdrawals, rental property, and annuities. And consider purchasing life insurance while you're both around to name the other as the beneficiary.

Scenarios B and C can both be handled by ensuring you have an emergency savings account with at least three to six months' worth of living expenses in it. You'll want to rebuild the fund once the crisis has passed, but emergencies like these are precisely why you built the emergency fund in the first place.

3. Inflation

Rather than blissfully imagining that prices will remain steady, be a Debbie Downer and factor inflation into your future budget. You can't be sure how much that inflation will be, but planning for some inflation can minimize the impact on your finances.

While Social Security cost-of-living adjustments (COLAs) can help your budget keep up with inflation, they're not foolproof and don't always keep pace. The biggest favor you can do yourself is to budget with inflation in mind. Take advantage of an online inflation calculator to understand how much you can expect to spend in the future.

Let's say you currently pay $250 per week for groceries. An online calculator will show you that with an annual inflation rate of 3%, you'll need closer to $290 to buy those groceries in five years, and in 10 years, those same groceries will cost around $336.

And if inflation averages 2% instead of 3% annually? Your smart planning meant you're ahead of the game.

No one can plan for every eventuality. However, you can admit to yourself that things will go wrong from time to time and having a plan in place will help you make it through.

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