No matter how well you plan for retirement, there’s a good chance that something unexpected will come your way, whether that’s a health crisis or economic factors.
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While you can’t plan for every possibility, the longer you save, and the more back-up plans you have in place, the better your chances of being prepared.
Two retirees explain the one big financial issue they didn’t see coming, the fallout it caused them, and offer advice for those who might find themselves in the same boat.
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Unexpectedly High Healthcare Costs
When Paula Coomer, 67, an author and editor, and her husband, 66, retired in 2015 from their day jobs — though Coomer still freelances — they thought they had their medical insurance needs covered by signing up for Medicare Part A and some private insurance that came with her husband’s retirement package.
Medicare Part A primarily pays for hospitalizations, however, while Part B covers the other kinds of medical services they would quickly discover they needed.
“We ended up paying an extra $100 per month between the two of us when we did finally sign up for Medicare B and ended up paying more than $7,000 out of pocket for medical co-pays when I had to have back-to-back surgeries unexpectedly,” Coomer said.
In addition, because they waited to sign up for Part B and had to retain their private insurance, their healthcare premiums now cost them $800 per month — twice what they expected.
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COVID-19’s Further Impact
These increased costs posed an even greater burden when the COVID-19 pandemic struck in 2020, Coomer said, bringing unexpectedly high inflation.
“We retired early with enough to be comfortable, but now things are tighter than we’d like them to be. We’ve taken on more debt, and it is clear that I will not be able to quit my [freelance] consulting/editing work in the foreseeable future,” Coomer said.
Coomer suggested that other retirees plan on having a part-time job, no matter how set you think you are. “And plan on your money only going half as far as you think it will. Make sure you have a substantial rainy day pot. We did, and nine years into retirement, it’s less than half of what we started with.”
Living Month to Month
Though Coomer is grateful that they own a home and two cars that are paid off, she said that the effects of higher healthcare costs plus steady inflation still have them living month to month and carefully budgeting expenses.
“We hope we don’t have another big emergency and have to really break into assets that we have tied up and frozen for the future when we really get old and decrepit,” she said.
Save and Plan
Coomer stressed that many people don’t really think they’ll live long enough to need the amount of money they do. She encouraged people to save as much as they can for retirement as early as they can, even just a little bit every month.
Additionally, she said, “Don’t ever, ever draw out of your retirement or your 401(k). That is going to make a huge dent in what you have at your disposal later on.”
A Divorce After 36 Years of Marriage
For Jennifer Estes — who preferred not to use her real name — a retired journalist who partially retired in 2009, life was already challenging enough. She was caring for her mother who suffered from dementia, her kids were leaving home, and she was struggling with a medical condition that took a physical and mental toll on her.
In 2013, the day after her husband retired from his job, he shocked her by filing for divorce after 36 years of marriage.
They had not formally decided what their retirement plans were going to be together before her husband left, and Estes was so thrown by the events she couldn’t think straight enough to make any plans for several years. “I was reeling from everything … I just stopped doing things to the point where, at one point, PG&E turned off my power, because I did not have the ability to write a check. I was living on Xanax and Ativan.”
The only thing she was able to do to survive was draw from her IRA until, several years later, at age 64, she began to collect Social Security benefits.
While she was able to keep the home she and her husband owned, and inherited her parents’ home, as well, there’s no way she’d sell the latter, as it’s known as “the family gathering place,” and it’s where one of her sons and his family live. “That place is about as sacred a place as you can get, to us. It was the house that we all knew and loved.”
She supplemented her income through part-time work and a minimal rent when her son and daughter-in-law moved in.
Avoid the Frivolous
In retrospect, Estes wishes that she had not spent money so frivolously in the years when it flowed more easily.
“Why did I spend so much money on ridiculous, frivolous things? Who needs four bottles of lavender nail polish? Who needs 25 mugs?” she said.
Stronger Savings
Additionally, she wished she had taken the money she spent frivolously and saved it. “I wish I had put it all into a money market, or whatever, or just something that gave me a little interest and security on my own under my name.”
Individual Accounts
Since divorce often leaves women at a worse financial advantage than men, due to men’s greater earning power and the fact that women often leave work to raise children, Estes is in favor of having at least one account to yourself as an emergency back up plan.
“Nobody thinks [divorce is] going to happen,” Estes said. “But there are other things that you might think that could happen, and you might trip and fall down a flight of stairs and lose a leg or whatever.”
Saving as much as you can for retirement, with at least one back-up plan or strong emergency fund, might just prevent you from making similar mistakes. When in doubt, consult with a financial planner.
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This article originally appeared on GOBankingRates.com: I’m Retired: The One Financial Issue I Didn’t See Coming and Wish I Had
