Retiring after working in the same career for decades will give you plenty of extra time to do things you enjoy. But it’s also important to ensure your finances are in order since you won’t have the same income coming in. Some people calculate how much they’ll need in retirement and feel confident that their nest eggs will carry them to the finish line.
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You can anticipate regular expenses, such as property taxes and groceries. However, it’s hard to anticipate every expense. Here are some of the common unexpected costs you could have in retirement and how to handle them.
Helping Adult Children
Every family is different, but your adult children may need financial aid from time to time. For example, your adult child could lose their job while supporting a family of three. You may want to swoop in and offer a financial cushion to ensure your adult child can keep up with mortgage payments during that time.
Adult children may also need financial support for significant milestones, such as buying a house or paying for a wedding. Teaching your adult children about money can reduce the likelihood of them having to ask you for money. It’s also promising if your adult children pursue multiple income streams so all of their paychecks aren’t tied to a single employer.
It’s good to discuss finances with your adult children to gauge where you may be needed. For instance, you may want to save up now or pick up a side hustle if you want to help your adult child with making a down payment. Knowing in advance when your adult child is planning a significant financial move gives you more time to prepare.
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Car and Home Repairs
As things get older, they tend to need more maintenance. Your home and car are no exceptions. As cars accrue more mileage, they need more frequent checkups with the mechanic. Furthermore, a house can need some fixes as it gets used.
Some repairs are necessary due to basic wear and tear. However, a car or property can get damaged in a storm, by individuals or in another event. These scenarios are more difficult to anticipate, but you can plan for basic repairs. Doing the repairs yourself makes sense in some cases, but for others, you may need to pay someone else.
It’s also good to address small issues before they become big ones. For instance, you should address any mold that you see on your property, as the problem will get worse if it’s ignored.
Healthcare
Medicaid and Medicare can help retirees cover their medical bills, but these health insurance plans don’t cover everything. You can still be stuck with expensive medical costs if you or your spouse have to go to the hospital or need a lot of medical care. Storing money in an HSA account can give you a nest egg for these costs. Plus, HSA accounts have many tax benefits.
Some medical issues can’t be avoided, but it’s also crucial to prioritize your health. This sounds simple, but many people do not prioritize maintaining their health until they end up with a disease. Exercising regularly, eating the right food and getting enough sleep are some of the hallmarks of a healthy lifestyle — and could save you money in the long run.
Income Taxes
You still have to pay income taxes even if you aren’t working anymore. That’s because your Social Security distributions are subject to taxation. You’ll be in a lower tax bracket since you aren’t generating as much taxable income, but it’s still good to keep it in mind.
Retirees can reduce their taxable income by capitalizing on the standard deduction. The standard deduction amounts in 2024 are $14,600 for single filers, $21,900 for heads of households and $29,200 for joint filers. You can calculate how the standard deduction impacts your taxable income when determining how much you’ll have to pay in income taxes.
Since you’re retired, it’s unlikely that you’ll have enough itemized deductions to exceed the standard deduction. However, itemized deductions may be the better path for some individuals.
Income taxes also vary for each state. That’s why many retirees move to states with no income taxes.
Long-Term Care
Some retirees go to assisted living facilities when they can no longer live alone. While some retirees feel like they will never have to cover this expense, the situation can look different 20 years from now. And it’s important to be prepared for this expense should it arise.
Having an assistant visit your property could save money compared with going to a facility. You can also decide how much care you need. Some people need 24/7 care, while others don’t need as much.
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This article originally appeared on GOBankingRates.com: 5 of the Most Common Unexpected Expenses Retirees Face — and How To Handle Them
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