Don’t be shocked by the hidden costs of retirement with our complete guide to these three expenses when planning ahead.
When you’re planning for retirement, it’s easy to focus on the obvious costs: day-to-day living, travel, and maybe some hobbies you’ve been longing to enjoy. However, some less obvious but often significant expenses can creep up in retirement if they’re not anticipated. By planning ahead, you can ensure your golden years are not only secure but enjoyable. Here are three common expenses many retirees face that might not be on your radar.
1. Healthcare Costs
One of the biggest financial surprises in retirement can be healthcare expenses. Even if you’re in good health now, the cost of medical care is likely to rise as you age. This includes everything from medications and out-of-pocket costs to specialist visits, which may not be fully covered by Medicare. Many Australians also rely on some level of private health insurance to ensure comprehensive coverage, and these costs can be substantial.
Additionally, costs can increase if you need long-term care or assisted living services. Retirement villages and aged care facilities can be a considerable expense, with upfront bonds or entry fees, plus ongoing care fees. You can get an idea of the current costs by visiting My Aged Care’s fee estimator. Planning early can help cover these possible costs with either savings or insurance.
2. Home Maintenance and Repairs
You may have paid off your mortgage by the time you retire, but home ownership still comes with ongoing costs. Many retirees choose to stay in their family homes, but as homes age, they often require more maintenance. This might include updating plumbing, replacing an old roof, or upgrading heating and cooling systems. According to a report from CHOICE, Australians often spend thousands on home repairs in retirement due to unexpected issues or the need for renovations to make the home more accessible as they age.
A helpful approach is to set aside a portion of your retirement savings specifically for home repairs. Consider scheduling regular maintenance checks to address any potential problems early on. You might also consider downsizing to a smaller, easier-to-maintain home as part of your retirement plan.
3. Inflation and Rising Living Costs
While inflation might not be a surprise, its impact is often underestimated. Over the years, the rising cost of essentials like food, utilities, and transportation can reduce the purchasing power of your retirement savings. And in recent years, Australians have experienced high inflation rates, which can significantly impact retirees on fixed incomes. The Reserve Bank of Australia offers a detailed inflation calculator, which can help you see how inflation affects purchasing power over time.
To combat inflation, consider investing in assets that grow over time, like shares or certain types of bonds. If you’re not comfortable making these decisions on your own, a financial adviser can help you create a balanced investment strategy to keep your retirement funds growing with or ahead of inflation. You can find a financial adviser through the Financial Advice Association of Australia’s website.
Planning for these hidden expenses means you can face retirement confidently, knowing that your financial health is secure. By considering these costs in your retirement strategy, you’ll be better prepared for whatever lies ahead, allowing you to enjoy your retirement years with peace of mind.
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