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Dealing with Unexpected Expenses in Retirement

As you plan for retirement, it's exciting to think of all the things you'll have time to do, including travelling more, spending time with family, and even picking up a new hobby. However, in planning for retirement, you have to also plan for the number of expenses along the way.

While you might plan for many of the expenses associated with retirement, unexpected things may come up. Here is a list of a few unexpected expenses that may crop up in retirement.

Healthcare Expenses

Canada has a very robust Medicare system, but that doesn't mean that every healthcare expense in retirement will be covered by insurance. This is where your healthcare costs in retirement have the potential to skyrocket.

One example of a service that may not be covered under Medicare is long-term care. According to the Government of Canada, many long-term care facilities and home-care services "charge co-payments or extra fees for additional services that aren't provided under the long term plan." 1

In addition to long-term care, Medicare may also not cover expenses related to2:

  • Ambulance services
  • Transportation to/from treatment
  • Home care
  • Prescription drugs (depending on your insurance)
  • Over the counter treatment and supplies
  • Occupational therapy outside of a hospital

As you plan for retirement, consider all health-related expenses that may arise.

Investment Losses

As you work with your financial advisor, you can develop a long-term investment plan focused on retirement planning. You can never completely predict the market, so investment losses may be one of your financial considerations. To mitigate this risk, make sure that your investment portfolio aligns with the amount of risk you are willing to take, especially in retirement. 

Home Maintenance

After retiring, you may find that you're spending more time at home, and you might want to make some home upgrades. While you can plan for many of these changes, some might arise unexpectedly. If your health changes or you face a medical procedure, you may need to adapt your home to be more accessible.

Or you may find yourself in a situation where you have to care for a loved one, whether it's an aging parent or relative, or you have to provide a place for your adult children to come if they need assistance. Even if these situations aren't in your initial plan, they may be worth planning for as you consider your home maintenance in retirement.

Hobby Expenses

Retirement is a time to celebrate everything you accomplished in your career and take time to enjoy the small things in life. Some retirees might be caught off guard by the cost of these new hobbies and activities. Because retirees are on a fixed income, it's essential to plan for these expenses in detail, so they don't crop up unexpectedly.

How to Deal With Unexpected Expenses in Retirement

Of course, this is just a shortlist of the many unexpected expenses during retirement. But luckily, you can help protect your retirement income by anticipating the unexpected. As you work with your financial advisor, consider:

  • Aligning your retirement plan with your goals
  • Setting aside an emergency fund for unexpected expenses
  • Maximize tax savings by maximizing your RRSP and TFSA contributions during your working years
  • Time your withdrawals to reduce your overall tax bill
  • Ensure that your investments are aligned with your risk tolerance

Retirement planning is an exciting process and requires detailed planning to anticipate both the expected and unexpected expenses. Working with a qualified financial advisor can help you feel secure in your retirement planning.

  1. https://www.canada.ca/en/financial-consumer-agency/services/insurance/long-term-care.html
  2. https://www.cbcn.ca/en/whats-covered-by-medicare

Please consult financial, legal, or tax professionals for information specific to your situation. The information and material presented are general, may have changed since the published date shown, and should not be considered financial advice. LetsPlan.ca is published in Canada exclusively for residents of Canadian jurisdictions where our products and services may be legally offered. The services offered within this site are available exclusively through our Canadian advisors. While we often provide original content, Twenty Over Ten initially provided the subject matter for this post. It has since been edited, reviewed and approved by our Privacy and Compliance Officer. Advisors may only conduct business with residents of the province(s) in which they are licensed and registered.