Hidden Retirement Costs That Could Catch You Unaware

Key Points

• If you own your home, maintenance and upkeep costs remain throughout retirement.

• Although Americans are often warned about healthcare costs in retirement, it’s easy to underestimate how much they’ll be.

• Inflation can slowly, steadily eat into your retirement income.

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

You've planned for years, and now you're ready to retire. At first, it's everything you dreamed it would be. Your days are available to spend any way you'd like. Finally, you can meet with friends, volunteer, and visit family. However, expenses keep popping up -- things you didn't plan for.

According to those who've already retired, here are some of the hidden costs in retirement that might surprise you.

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Despite your best laid plans

No matter how well you've planned a retirement income strategy, don't be too hard on yourself if you're hit with a surprise expense. After all, it's next to impossible to plan for every eventuality.

The best you can do is have a clear idea of what could occur and a plan in your back pocket in case it happens.

Housing costs

Whether you rent or own, keeping a roof over your head can cost more than expected. For example, the cost of electricity grew by 4.5% between October 2023 and October 2024. And according to Reuters, natural gas prices climbed between 30% and 50% in 2024.

In addition:

• Homeowners insurance: Homeowner policies are expected to jump by 8% by the end of 2025.
• Home maintenance: Some professionals suggest budgeting 1% of the purchase price of your home for annual repairs and maintenance. For example, if you purchased your home for $300,000, expect to spend around $3,000 each year.
• Rental prices: According to Baselane, to combat rising operational costs, 85% of landlords increased rental prices last year, with nearly one-third asking for an extra 6% to 10%.
• Property taxes: While rising home values may seem like a boon to homeowners, they also lead to higher property tax bills.

Healthcare

A Fidelity Investment study found that the average 65-year-old who retired in 2024 can expect to spend $165,000 on healthcare and various medical treatments. While the cost of healthcare in the U.S. is notoriously expensive, the idea of spending $165,000 on care may feel almost surreal. After all, if you're of a certain age, $165,000 is more than you spent on your college education and perhaps your first home.

Moving

An estimated one in seven Americans who moved in 2024 did so due to retirement. While moving to a lower-cost-of-living area can be good for your month-to-month budget, moving itself can be shockingly expensive. On average, a full-service local move (within 100 miles) costs $7,600. A full-service long-distance move costs an average of $9,140.

If that's not an expense you're planning for, it can dent the first year of your retirement budget.

Transportation

If you own a car, you may spend more than $9,000 a year to keep it up and running. Between the monthly payments, maintenance, auto insurance, and gasoline, vehicles are not inexpensive. And if it's an older auto, you may spend even more on repairs.

Taxes

Given that most people earn less money in retirement than during their prime working years, it's natural to expect your overall tax bill to decline. Not only is your income lower, but you get a bump in your standard deduction once you reach age 65.

Don't be disappointed, though, if your taxes don't drop as much as you expect them to. Depending on your total income, your tax bill could be high enough to surprise you.

In addition to (possibly) owing taxes on Social Security benefits, you'll need to pay income taxes at your ordinary rate when you withdraw money from a retirement plan like a traditional 401(k), traditional IRA, traditional 403(b), SEP IRA, or SIMPLE IRA. In addition, most states assess tax on at least some types of retirement income.

There may be no way to avoid taxes, but you can take steps to minimize them. One example is contributing your retirement savings to accounts that are taxed differently when it's time to withdraw. For example, splitting your money into a Traditional IRA, Roth IRA, and brokerage account is a good way to match your anticipated yearly income with the smartest available withdrawal strategy.

Although you can't anticipate every financial surprise in retirement, you can expect to run into a few of the most common and tuck enough into an emergency savings account to see you through.

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

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