7 Expenses That Can Kill Your Retirement Fund

Every morning you drag yourself out of bed for work and tell yourself that soon enough, you’ll retire and won’t have to worry about money or working ever again. You’ve got your retirement plan set up and have been contributing faithfully for decades, but have you considered all the expenses that can pop up unexpectedly? You can adapt to some small costs, but these seven expenses can really eat up your retirement fund. Keep these in mind when setting up your retirement savings so you don’t come up short in the end.

  1. Helping adult children:

    Even if your job or income wasn’t affected directly by the recession, there’s a good chance that your working children hit some hard times. In 2011, more than half of U.S. parents were helping their adult children financially with things like living expenses, transportation costs, and extra cash. For 7% of parents, this new burden meant they had to delay retirement. Most people only plan for one or two people when putting away money for retirement, but if a child moves home or needs help with rent money and groceries, your savings will be used for three. Consider what you can reasonably spare when helping out your children so you don’t all end up in the poor house.

  2. Long-term care:

    While we’re lucky enough to face a longer expected lifespan, these extra years can put a strain on your retirement fund. After retirement, many people are living 25 or 30 years on just their savings, and it will likely become harder to care for yourself as you age. You should take into account as you make plans for retirement that there is a good chance you will need to hire someone to assist you in your daily life or move into an assisted living or nursing home at some point. Medicare and other insurance plans don’t normally cover long-term care, so the cost will be left to your loved ones if you can’t pay for it with your retirement savings.

  3. 401(k) fees:

    Your employer-sponsored 401(k) plan may seem like a no-brainer when it comes to saving for retirement, but those plans can actually take a huge chunk of your money away from you through tricky fees. One progressive public policy research group found that these fees could eat up as much as 30% of your retirement fund (though trade groups say the cost is much lower than that research claims). Regardless of the actual percentage you’re losing, 401(k) administrative and marketing fees can add up, and trading costs can skyrocket in actively traded funds that are bought and sold rapidly. You can’t avoid all fees, but you can talk to your financial adviser to ensure you’re minimizing the extra costs as much as possible.

  4. Health care:

    Out-of-pocket health care costs for retirees have been rising about 6% each year for the past 10 years, which can spell big trouble for your retirement fund. Medicare doesn’t go as far as many retirees think it will, and you can be caught by surprise when a huge bill comes in the mail. A recent report says that a 65-year-old couple will spend $240,000 or more out of their own pockets for health care during their retirement. Prepare for this extreme expense by delaying retirement, educating yourself on prescription drug plans and the retirement insurance your company offers, and factoring high medical costs into your retirement budget.

  5. Debt payments:

    A hefty retirement fund can easily be canceled out by your debt, so don’t let your saving be all for naught. If possible, pay off the debts you have before you retire. It’s better to do it when there’s less interest to pay and you can go into retirement knowing exactly what money you have to spend. Some experts even suggest paying off debt rather than contributing to your retirement fund (if it’s a one-or-the-other situation), because of the high interest rates on debt compared to the low rate of return on retirement investments.

  6. Home maintenance:

    With retirees living more active, healthy lifestyles, it’s likely that you’ll be able to live independently in your own home longer than retirees in the past. But houses bring their own set of costs with them that you might neglect to budget for. Besides the mortgage and utility bills, unexpected repairs can cost you a pretty penny. Whether it’s minor maintenance, like lawn care or appliance repair, or a major mishap, like a broken air conditioner or foundation problems, keeping up your home will likely use up a big chunk of your savings. Factor in these costs when deciding whether your house is the best financial decision for you after retirement or whether a retirement community would be a better use of your money.

  7. Travel:

    You’ve probably got a few places on your bucket list that you’re going to visit during retirement, and you think you have the money for those trips. But check your numbers twice; most people tend to under-budget for vacations. In addition, if you have children or elderly parents who live far away, you may find yourself racking up more travel expenses than you expected as family events and emergencies come up. Traveling can be a great part of retirement, but make sure you save even more than you think you’ll need for life’s unexpected moments.