When you’re living off your savings, unexpected expenses can undo years of diligent planning. Withdrawing an extra €5,000 for household repairs might not seem like much in the grand scheme of things, but it can derail your plan, especially since those funds are no longer invested and working for you.

To make the most of your savings and investments, your retirement spending plan needs to take account of setbacks that can arise. To that end, five common yet unexpected setbacks that can affect how your retirement plan works for you are outlined below.

  1. Hidden Housing Costs

While a high percentage of those aged 65 and older owning their home, many pre-retirees fail to look beyond monthly mortgage repayments when estimating long-term housing costs, making unanticipated home repairs the single most common financial surprise for many retirees’.

Having your home inspected by a professional can help identify hidden problems before they become major headaches and a good rule of thumb is to set aside a budget of 1% of the value of your home for annual repairs and maintenance.

  1. Uncovered Health Care

Even with Private Health Insurance, it’s no secret that health care is likely cost more in retirement. Taking some time to review your Health Insurance Cover to ensure that it meets your needs as well as providing access to key hospitals, consultants and doctors.

Also consider the other expenses and services you might need, e.g., dental, hearing, and vision care, as well as the likely co-payments you may need to contribute towards the cost of this care. 

Finally, evaluate your existing plan against plans that are available from your current provider as well as those that are available from other providers and don’t hesitate to move providers if they offer improved benefits and a more competitive premium.

  1. Long-term Care

Looking at statistics from the US, it is estimated that close to 70% of today’s 65-year-olds will require some kind of Long-term Care and they will require this care for an average period of about three years.

Arranging Long-term Care can be arduous and the costs can be significant, which is why it is really important to start thinking about this now and to make allowances for these costs in your plan.

  1. A Child in Crisis

It’s natural to want to step in if a child needs financial help. However, the older you are, the more difficult it can be to recover from such an unanticipated expense and in fact, half of all parents financially helping an adult child feel it’s putting their retirement savings at risk. 

Before offering support, think about how much help you will be able to provide and for how long. Decide if you are willing to withdraw a lump sum from your savings or would it be more comfortable for you to cover smaller expenses over a longer time-frame while they get back on their feet?

If you do decide to dip into your retirement savings, be sure to have an honest conversation with your child about the terms of the arrangement, including whether the money will be a gift or a loan and be clear about the extent to which you’re willing to help.

Crucially, boundaries and clear communication are really important in these situations as your child may see the money as a gift while you expect to be paid back. To avoid conflict down the line, if you both agree that it is a loan, make sure you understand the rules surrounding intrafamily loans before finalising terms as this may also avoid an unexpected tax bill.

  1. Losing a Spouse

There’s little you can do to prepare for the emotional shock of losing your spouse but failing to prepare for it financially can leave you in a precarious position.

In particular, surviving wives, are more likely to face financial hardship with about half reporting at least a 50% decrease in income after losing their spouse.

The good news is there are steps you can take now and in the future to mitigate such risk:

  • Life insurance:

The lump sum paid upon the insured’s death can help offset the loss in income so take the necessary steps now to review your net worth statement, future cash flow needs and goals to see if there are any significant gaps you may want to insure against for your surviving spouse.

  • Pensions:

If you or your spouse is eligible for a pension, take the time to investigate survivorship options before you retire and weigh up these options with a financial planner who will help you to think about how all your sources of income fit together.

  • Social Welfare:

Ensure that the surviving spouse is eligible to receive their full entitlement to the maximum Survivors Pension and any other Social Welfare benefits that are available.

Make sure your Wills and Estate Plan are organised and up to date as this will help to ensure a smooth transition of assets upon your passing. Talk to your financial planner and solicitor to identify and correct any gaps in your plan.

Finally, Don’t Stress

While it isn’t possible to avoid every curveball life may throw at you, a little extra foresight and planning can make help by making unexpected expenses more manageable and making you feel more confident and secure going forward.

How we help

We can help take the effort out of this for you by demonstrating how this would work for you and your family and providing you with one cohesive plan.

You can arrange a meeting by clicking here to access my diary, email info@smartfinance.ie or alternatively, call me on 087 8144 104.

Source: The Schwab Center for Financial Research which is a division of Charles Schwab & Co., Inc.