What I’m Telling My Clients: The Surprising Expenses That Can Drain Retirement Plans
Key Takeaways
- Many retirees underestimate long-term care costs, home modifications, and transportation.
- Private-pay home and companion care can deplete savings.
- Early home safety assessments and modification plans can help retirees age in place safely and cost-effectively.
- Planning for changing mobility and transportation needs prevents isolation and maintains independence.
- Setting aside at least 10% of retirement savings for unplanned expenses and involving family in financial discussions can protect long-term stability.
It’s no secret that 11,200 Baby Boomers are retiring each day. Unfortunately, clients in the retirement and retirement readiness phase have realized they have overlooked some unexpected expenses. Health costs not covered by Medicare aren’t the biggest surprise; what catches retirees off guard is failing to budget for long-term care of loved ones, home modifications, and transportation in their later years.
Private-pay home health and companion care can quickly drain finances since most providers don’t accept Medicaid and require a four-hour daily minimum. For those living away from aging parents, this is an unplanned expense; for those nearby, it often means sacrificing the opportunity to earn income during their own retirement years. Meanwhile, many clients will face similar long-term care needs themselves amid a growing workforce shortage.
Note
The American Health Care Association’s 2024 Access to Care Report states that 57% of nursing homes have a waiting list for new residents.
What I’m Telling My Clients
Preparing the Home for Aging in Place
Housing modifications and lifestyle changes that come with aging can also be a financial drain. Home modifications can range anywhere from $1,500 to over $30,000, depending on the severity and extent of the changes needed to support a client’s lifestyle. Projects could include a walk-in tub or shower, ramp installation, stair lift installation, and more.
Note
According to Retirement Living, the average cost of ramp installation is $1,110.
Schedule a home safety assessment with an occupational therapist early in retirement and create a prioritized modification checklist based on health, mobility, and budget. To help offset expenses, consider taking on a roommate for financial and companionship benefits.
Managing Transportation and Mobility Costs
Likewise, transportation needs will likely change over time and can be costly. When clients can no longer drive, non-emergency medical transportation services to doctors’ appointments and other critical appointments can vary depending on the type of transportation needed to accommodate the client’s level of mobility. Expenses related to delivery services for groceries, meals, and prescriptions must be considered.
Establishing a support network of family and friends or utilizing local council on aging programs can help reduce these costs and maintain independence.
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Planning for Unexpected Retirement Expenses
I encourage clients to set aside at least 10% for unexpected retirement expenses to hedge for them. Outside of planning for themselves, I ask if there’s a possibility that their parents or another elderly loved one will become financially dependent on them in the future. If so, I urge them to consider doing a family financial planning meeting to review their benefits and assets and assist their loved one with a long-term care strategy.
The Bottom Line
As a financial advisor, I preserve my clients’ assets and help them fulfill their financial and non-financial goals in retirement. Thus, I work to uncover any scenarios that could potentially economically disrupt their retirement plans. By proactively considering long-term care, home safety, and transportation needs, retirees can take steps to feel financially and physically comfortable during their later years.