Five unexpected retirement expenses

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To ensure you don’t run out of money, planning for your retirement requires a great deal of foresight. Some of your expenses are easy to plan for, but there are others that you simply can’t predict.

That means that you will always need to leave a little bit of room in your planning budget for the unexpected expenses that will occur throughout your retirement.

Here are the five most common unexpected expenses.

Helping family members
Whether it is your children, your grandchildren or your parents, at some point in your golden years you are probably going to be called on to help in some financial sense. Life events like wedding, the birth of children, divorces or health issues are impossible to predict, but they will almost certainly happen at some point. You don’t want to fall into the trap of constantly bailing out your kids or you will find your nest egg whittled away very quickly, but you will need to have an allowance for some major life events that may require your assistance.

Medical expenses
You may feel as fit as a Mallee bull now, but it won’t stay that way forever. The latest report from the Productivity Commission explains that while Australians have high life expectancy, they also have the highest number of years spent in ill-health compared with other OECD countries. Many Australians have, or are at risk from, chronic conditions such as mental illness, diabetes, lung cancer and cardiovascular disease, and we have one of the highest obesity rates in the world, one that appears to be increasing. One of the most basic and important uses of finance in retirement is to be able to pay your medical costs and potentially afford aged care, if required.

Living longer
At the other end of the spectrum, you don’t know how long you are going to live in retirement, either. Australians do have a high life expectancy; in fact, a couple aged 65 has a 50 per cent chance that at least one of them will survive until they are aged 95 or over. The possibility of outliving your retirement savings is a very real prospect for many, with financial advisers now suggesting you could live at least five years longer than the statistical average.

Death of a loved one
While not entirely unexpected, most people prefer not to think about the point in their life when they will suddenly become single. As well as the emotional costs there are significant financial costs and it pays to be a little bit prepared for this eventuality. If only one of you looks after the finances, it is worth changing that arrangement in retirement, and work together as a team. Regular conversations on this taboo topic are important to ensure you have adequate life insurance and have planned ahead, including your will, estate planning, powers of attorney, etc.

Inflation
We know prices are forever rising, but the rate at which they increase is anyone’s guess. Power prices have been a good example in recent years, but there will always be some expense that rises at a rate much faster than predicted. This can present significant challenges when trying to work out your cost of living year on year. When you are working, the rises in inflation are offset by potential pay increases, but you rarely have that luxury in retirement, with the indexation of the Age Pension offering little respite.

What unexpected expenses have cropped up since you retired? What tips would you offer our readers when planning your retirement?

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Written by Ben

80 Comments

Total Comments: 80
  1. 0
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    Fed.gov. changes to superannuation rules is the biggest problem with a lot more to come.Try as they will it will be just another stuff up, most people are worried about their retirement future.

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      Change is a part of life so get used to it.

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      Those who planned for retirement should NOT have to ”get used to change” in the conditions under which they manage their retirement finances merely due to stinking cheating lying politicians pulling the rug. If people can’t have confidence in their retirement plans, they will save less and the costs of funding retirement will rise. Only an idiot condones policy that deprives people of the security they earned and should be entitled to enjoy.

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    I agree with Floss. Feds threw our careful planning out the window and mocked our frugality through working years. So spend up I reckon. Who knows what they will do next to our savings. But to get back to the topic, Dental expenses can ruin a budget and insurance costs are huge with reducing benefits – particularly medical benefits. And further to medical benefits, they are a bit like the super changes, don’t value preventative action that will reduce big claims in the future.

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      Agree with that, plus cost of house repairs, increases in government charges and utilities when you are home all day energy use and cost goes up

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      Then there is the white goods replacement.

      So far for me there has been new stove, hot water service, fridge, freezer, cloths drier, pool pump, ride on mower & a few TVs & computers.

      Then there is my ladies cars, 2 in 16 years at a total depreciation loss of about $35,000 & already about $15,000 on the current one.

      If you are at all mechanical you can save a fortune on cars. I drive a 37 year old classic, & have for the last 15 years. It owed me about as much as one of my ladies hatchbacks when I started driving it, & has cost only $10,000 in maintenance in that 15 years. Better still is no depreciation, at all, in fact it is worth about $10,000 more than my total expenditure on it today.

      Talk about win win. Drive a car you really love driving, & make a profit doing it.

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      Then there is the white goods replacement.

      So far for me there has been new stove, hot water service, fridge, freezer, cloths drier, pool pump, ride on mower & a few TVs & computers.

      Then there is my ladies cars, 2 in 16 years at a total depreciation loss of about $35,000 & already about $15,000 on the current one.

      If you are at all mechanical you can save a fortune on cars. I drive a 37 year old classic, & have for the last 15 years. It owed me about as much as one of my ladies hatchbacks when I started driving it, & has cost only $10,000 in maintenance in that 15 years. Better still is no depreciation, at all, in fact it is worth about $10,000 more than my total expenditure on it today.

      Talk about win win. Drive a car you really love driving, & make a profit doing it.

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      Then there is the white goods replacement.

      So far for me there has been new stove, hot water service, fridge, freezer, cloths drier, pool pump, ride on mower & a few TVs & computers.

      Then there is my ladies cars, 2 in 16 years at a total depreciation loss of about $35,000 & already about $15,000 on the current one.

      If you are at all mechanical you can save a fortune on cars. I drive a 37 year old classic, & have for the last 15 years. It owed me about as much as one of my ladies hatchbacks when I started driving it, & has cost only $10,000 in maintenance in that 15 years. Better still is no depreciation, at all, in fact it is worth about $10,000 more than my total expenditure on it today.

      Talk about win win. Drive a car you really love driving, & make a profit doing it.

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      Has been you didn’t mention what your classic car is ?

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      My car is 3 years old and I have ben offered a good deal on a new one. Should I take it?

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      Old Geezer, It depends how well you care for your car or whether it is just a means of A to B and the km you have done. Also what make it is.

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      Nay I just buy a new one if I need it or not.

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      Yes go ahead O.G. don’t worry about the 40/60% depreciation you will bear, its new and shiny.
      If the vehicle were shares would you sell it after taking such a loss and then invest the money in the same shares?

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      Maybe he leases his car and pays the same no matter if he keeps it or takes the new one. Lease costs can be then fully written off against his income.

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      ” Nay I just buy a new one if I need it or not”, does not sound like a lease to me.

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      I agree with Hasbeen, especially regarding when everything breaks down or completely expires at the same time. It’s often cheaper or almost so to replace some items as it to repair them because of the labour charges + travelling time fee, also replacement parts.
      e,g, our hot water service, refrigerator, stove all needed replacing within a month. The refrigerator had been repaired a few months before but other parts then stopped working properly. The Hot Water Service had burnt out. The stove the seam in the top of the oven split and it also developed a gas leak. A couple of months later our Water Softener decided to spew salty water all over part of our lawn. Our water is very hard and my Mum has very sensitive skin (so bad she can only wear clothes that are 100% cotton) which is the main reason we bought it. The water also tastes a lot better.

  3. 0
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    You left tradesmen off the list.
    As long as your house can weather the next 30 years you are fine. So fix stuff when you first retire and are still capable of painting and climbing on rooves because its all going to cost more tomorrow.

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    Opt out of Superannuation Fund as soon as possible. We did this and have not regrated it. Any loss, which in our case was considerable, is more than made up by taking charge of your own investments. Don’t know how to invest? There are on-line coursed to tell you how. Or speak with a reputable accountant and/or stockbroker. One that is completely independent of any Funds managers etc.

  5. 0
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    I should have said in my previous comment that escaping the claws of Centrelink is impossible, unless you have completely independent means, which if you’re reading this is probably not so.

  6. 0
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    Be careful what you pull out of your Super/Income Stream. I had to pull out $70,000 to help my Mum enter a Retirement Village whilst her house was being sold to ensure she could buy her unit, when she was unable to look after herself any more. In the end it wasn’t needed as the sale of her house went through, but under the rules I couldn’t put it back. Now it earns a measly 2.5% in a term deposit, instead of the 9% plus it was earning in my Income Stream.

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      Put it in a managed fund it will earn more than 2.5% Just not quite the tax free spot super is but you have to earn a lot of interest before paying tax

  7. 0
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    These are all good points and need to be thought about. But guys don’t put off your retirement too long you are unlikely to be the one who lives to 95 and you don’t want to die without having retired at all, you deserve that rest and recreation if you wait too long you won’t get a retirement at all.

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      Owning your home is almost an essential ingredient. But now we are having a banking commission and insurance and Superannuation looked into at the same time, the average retiree now and in the future you hope gets what they deserve and in the positive not the negative, but Super goal post movement is almost like a rackett.
      This Royal Commission better have some teeth.

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      I wouldn’t trust a Royal commission run by the Liberal part. As far as super goal posts moving there seems to be a lot of people telling guys to work longer because they need more money, it’s up to the individual but you don’t need that much. I think it’s a bit rude for wives who don’t work or work part time (already retired) to be telling guys they need more money to retire. Because the guy will probably die before he gets a rest, but it does set their wives up for a nice comfortable retirement. This would be a great opportunity for the guy to retire and the woman to get a job after all it gives them an opportunity to built up that super theyre always complaining about just like us , work hard long hours without complaining. What’s the bet they don’t need so much money after all :).

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      I wish I had retired sooner than I did too now as it’s no where near as expensive as they make it out to be.

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      OG time is the thing we have least of.

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    Helping family members financially has almost busted me. Circumstances unavoidable , but getting back in front takes time, and really there are times when the help simply runs out.
    So beware , if you have a relative in strife , that you are careful how you hand the helping hand out.
    So all can walk out of the bad time in reasonable shape.
    If you don’t, you will be living a cardboard box!

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      I just tell them as they walk through he front door I haven’t got any money to lend them. Saves all the sob stories too.

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      When the relative comes through the door tell them you’re broke how about a loan , then watch how quick they leave. All my relatives think I’m broke, they avoid me like the plague. But guess what I’m not. 😉

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      My twin brother reckons he is going to leave me all his debts and he must be at least twice as wealthy as I am. He is the eldest so he reckons he should die first too.

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      OG my brother was paying a million dollars a year in tax in the early eighties , if he wanted to know what he’s worth it would take the accountants a few days to work it out. Unfortunately he hates me. Ha ha when’s he’s dead he will be no richer than me.

  9. 0
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    My greatest fear is that I don’t live long enough to spend it all so the government has to pay for my funeral.

    Ill health not a problem as Medicare covers that and you spend a lot less when you are sick too.

    If my better half dies I get to go first class everywhere instead of counting my pennies. Yes they are a real scrooge.

    All you have to do is earn more than the inflation rate and that one takes care of itself.

    Family members can look after themselves as I’m certainly not looking after the outlaws.

    Now I’d be happy to die with nothing.

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      It’s only money as long as you have enough. Who cares about the rest. Money never really made me happy but a lack of it can make me miserable.

  10. 0
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    I am not talking about change O.G. I am talking about Fed. Gov. stupidity and don’t try to tell they are not stupid.

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      If you are talking about the asset test changes then it was a well over due change. If you have enough to be affected by the changes you simply should not have been on welfare in the first place.

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      You persist with this DUMB argument based on ASSUMPTIONS about other people’s circumstances, OG, and ignore the reality that the change was BAD FOR THE NATION, because it reduces the incentive to save and will result in more people on higher pensions. But like our pollies, some people are just too thick to see past ”doh, they have money – take it away”!

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      It is good for the nation as the money saved can be spent elsewhere instead. As a taxpayer I’m glad the government has made a tough decision here. However I was very annoyed when they gave that concession card back to those who can afford not to have it. This is nothing but greed.

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      There’s NO SAVING, dunce! The policy change will push the cost of pensions UP UP UP UP UP. You can’t SAVE money by putting people in the position where they can’t benefit from being responsible, because they become irresponsible in response.

      Yes, of course you were annoyed others got something you didn’t, you green-eyed monster. It never entered your empty little head to think that over time reducing costs for people whose savings are not adequate to last a lifetime will reduce their need for a pension in later life.

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