Retirees often underestimate the significant long-term costs of prescription drugs (especially non-generic), concierge care fees as doctors opt out of Medicare, and travel expenses required to access specialists from remote locations. These expenses, alongside gaps in Medicare for dental, vision, and long-term care, can add tens of thousands to retirement expenses.
Retirees often overlook these 3 medical costs: medications, medical isolation, and concierge care.
1. Health care costs. Although retirees expect health care bills to be a reality, the rising cost of good health care often surprises them, noted Jeffrey Stouffer, a certified financial planner and Finance and Investing Expert on JustAnswer.
The five most common stealth expenses in retirement, including health care, taxes, emergencies, family-related expenses, and inflation.
Retirees are often surprised by the costs of homeownership, health care and taxes in retirement. The cost of maintaining your retirement lifestyle is higher than most people expect due to the impact of inflation over time.
Only a small fraction of Americans, around 3% to 4.7%, actually retire with $1 million or more in retirement accounts, according to Federal Reserve data, despite many feeling they need that much for comfort. The median savings for those approaching retirement (ages 65-74) is much lower, around $200,000-$609,000, making the million-dollar milestone rare, though "401(k) millionaires" are growing in number.
Healthcare is one of the most underestimated retirement expenses. Even with Medicare, out-of-pocket costs for premiums, prescriptions, and uncovered services can be significant. A 65-year-old retiring in 2025 could expect to spend about $172,500 on healthcare alone, excluding long-term care.
The $1,000 a month rule is a retirement guideline suggesting you need about $240,000 saved for every $1,000 per month in desired income, based on a 5% annual withdrawal rate (5% of $240k is $12k/year, or $1k/month). It's a simple way to set savings goals, but it doesn't account for inflation, taxes, or other income like Social Security, so it's best used as a starting point, not a complete plan.
How many Americans have $500,000 in retirement savings? Of the 54.3% of U.S. households that have any money in retirement accounts, only about 9.3% have $500,000 or more in retirement savings.
Retirement Regret #1.
Retiring as soon as possible can be a priority, but retiring too early can be a big mistake. For one, premature retirement can mean gambling with your financial security in the future. If you leave work too early, you could be forfeiting some key, higher-earning years to build up your savings.
Suze Orman's key retirement advice emphasizes starting early (15% savings from age 25), prioritizing Roth accounts for tax-free withdrawals, maximizing employer matches, waiting until age 70 for Social Security, building a large emergency fund (2-3 years' expenses after 50), and considering home equity (reverse mortgages) for income if needed, all while living below your means to save more today for less spending tomorrow.
To be sure, housing costs don't disappear entirely in retirement. Even if you've paid off the mortgage, you'll still spend money on home maintenance, property taxes and utilities. Downsizing in retirement? Keep in mind the moving costs associated with downsizing, relocating, or moving into senior-living facilities.
Major Monthly Expenses in Retirement
For a 70-year-old, average retirement savings vary significantly by source, but generally fall between $250,000 and over $600,000 (mean/average), while the median (half have less) is much lower, around $100,000 to $200,000, highlighting a wide gap due to high earners skewing averages. Key figures show the mean for ages 65-74 around $609,000, but the median for that group is closer to $200,000.
Among the biggest mistakes retirees make is not adjusting their expenses to their new budget in retirement. Those who have worked for many years need to realize that dining out, clothing and entertainment expenses should be reduced because they are no longer earning the same amount of money as they were while working.