3 Emergency Costs That Could Sink Your Retirement

Your retirement plans probably include things like traveling, pursuing your favorite hobbies, spending time with friends and family or simply relaxing. While retirement should be a time of fun and leisure, there are very real challenges that can arise even though you’re no longer working.

Often, these challenges can generate significant costs. Without proper planning, those costs can drain your retirement assets, making it difficult for you to keep up with inflation, pay bills or maintain your standard of living.

Don’t get caught unprepared in retirement. While you may not be able to predict when an emergency will arise, you can plan ahead and have a strategy in place. A well-defined retirement strategy can help you limit the financial damage and protect your assets and lifestyle.

Below are three common emergencies that can pop up in retirement. If you don’t have a strategy in place, now may be the time to create one.

Costly Housing Repairs
Every homeowner knows there’s always something that needs fixing in any house. Sometimes those repairs can be delayed. Other times, though, you don’t have much choice other than to take action.

Whether it’s a new air conditioner or a repair to your foundation, housing repairs can put a dent in your budget. When you’re retired, those costs can be even more dangerous, as you may not have the income or assets to withstand a substantial cash outflow.

There are steps you can take to prepare yourself, though. First, always make sure you have a sizable emergency reserve that’s held in an account with high liquidity and very little risk. You also may want to look at your homeowners insurance and any potential warranties. Some changes in protection could limit your out-of-pocket exposure.

Also, you may want to consider downsizing, possibly to a town house or condominium. You may find a unit in a community in which the builder or the homeowners association covers repairs to the actual building, while you’re responsible only for repairs inside the unit. As an added benefit, your costs for things like taxes, utilities and more could be lower in a smaller home.

Sizable Out-of-Pocket Health Care Expenses
Medicare is a valuable resource for many retirees, but it doesn’t cover all out-of-pocket health care costs. In fact, Fidelity estimates the average 65-year-old couple will spend $260,000 on out-of-pocket health care expenses in retirement.1

How can you limit these costs? There are a few strategies to employ. One is to look at Medicare supplemental policies that provide protection above and beyond traditional Medicare coverage. You can also make sure your health savings accounts (HSAs) are well-funded, as you can take tax-free distributions from these accounts to pay for medical costs.

Finally, consider a long-term care insurance policy. These policies provide coverage for extended care and assistance with basic living activities, such as eating, dressing and mobility. Often, the policy covers care provided either in the home or in a facility.

Living Longer Than You’d Expected
Everyone wants to live a long, healthy life. However, there are costs that come with living longer than you’d anticipated. One is that you simply may not have the assets to support your lifestyle well into your 90s or even later. If so, you may have to reduce your lifestyle expenses substantially in your later years.

Inflation can also be problematic with a long life span. Even marginal increases in prices can compound and have a big impact over the course of a retirement that lasts several decades. And of course, the longer you live, the more likely you’ll require long-term care or other medical assistance.

Guaranteed lifetime income* streams can help you minimize longevity risk. For example, annuities offer many options that allow you to convert your retirement assets into streams of predictable, lifetime income.

Do you have a plan to deal with these three emergency costs? If not, let’s talk about it. Contact us today at J. Harris Financial. We can help you analyze your needs and develop a strategy. Let’s connect today.

1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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