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Many people expect their expenses to decrease in retirement, but after age 75 the opposite is often the case as costs increase in many ways after a decade of retirement. For example, it’s estimated that if you retire in 2026, you’ll need about $175,000 more to cover health care costs during retirement, and that figure doesn’t even include long-term care.
Add taxes, home modifications and everyday bills, and retirement may seem more expensive than ever. With that in mind, here are some hidden costs that may surprise retirees, and how to plan ahead for them.
Health care and long term care costs
Health care is a common expense that is difficult for retirees to anticipate. Medicare covers hospital stays and doctor visits, but does not cover extended care such as nursing homes, assisted living or assistance in the home.
Jay Zygmont, Certified Financial Planner and Founder childfree wealthsaid, “The average annual cost of a room in a skilled nursing facility is $125,000. Men will spend an average of 2.2 years in care and women 3.7 years. The cost of long-term care is increasing 5% every year, so you need to be prepared.”
The takeaway: Consider long-term care almost certain. Planning early helps protect your savings and peace of mind.
Home Modification and Help Services
Even escaping a nursing home isn’t cheap, as changes in mobility often include ramps, stair lifts, or walk-in showers, while in-home help incurs persistent bills.
Jeremy Gurewitz, co-founder of Solace Health, said, “Even a part-time home health aide can earn more than $60,000 a year, and full nursing home care is significantly more expensive. Other hidden costs also include home modifications like a stair lift or walk-in shower, which can often run thousands of dollars, but are essential for safety and independence.”
The AARP Home and Community Preferences Survey found that 75% of adults over age 50 want to stay in their own place, but many underestimate how much it will cost to do so safely. Seventy-one percent said they would probably install ramps or chairlifts around their homes for easier access.
The takeaway: If you want to stay at the home, budget for both the renovations and the support services that make it possible.
tax and medical surcharge
Once retirees reach age 73, the IRS requires them to begin withdrawing money from tax-deferred accounts like traditional IRAs and 401(k)s. These withdrawals, called required minimum distributions (RMDs), increase taxable income. If income increases enough, it may also trigger Medicare’s income-related monthly adjustment amount (IRMAA), which increases monthly premiums.
financial planner aaron brask Said, “I sometimes get calls from people asking why their Social Security checks are smaller. Most of the time, it’s because Medicare premiums go up after they exceed the IRMAA income limits.”
The takeaway: Smart tax planning, such as Roth conversions or carefully timed withdrawals, can reduce future surcharges.
Other surprise costs
Not every hidden expense comes from health care or taxes. Even routine bills can add up in later years.
Pratik Agarwal, Co-Founder Best Online Traffic Schoolsaid, “Car insurance rates are a big expense that can plague aging drivers. While rates decline as people age, they begin to rise again after age 60. So, while a 60-year-old may be paying some of the lowest rates of his driving life, that rate will increase 10%-20% in the senior years.”
Inflation is another hidden cost. This doesn’t just affect groceries or gas. This increases the cost of insurance premiums, medical supplies and other essential items. Since 2000, health care prices have increased about 40.3% faster than overall consumer prices, according to a KFF analysis of Bureau of Labor Statistics data.
For retirees on fixed incomes, even modest annual increases turn into a meaningful stress.
The takeaway: Everyday costs don’t always remain constant in retirement. Keep in mind the continued lack of inflation and look for ways, such as insurance discounts, to minimize the impact.
Kaitlyn Moorehead Contributed to the reporting of this article.