Strategies for a successful retirement

Planning for retirement is exciting, but many people seriously underestimate what it will actually cost to live comfortably for 20–30 years (or more).

Here are seven expenses that frequently catch retirees off guard — in a new order, with one important addition that’s often completely ignored.

You may leave the workforce, but the IRS doesn’t retire. Social Security benefits can be taxable (up to 85% in some cases), traditional 401(k)/IRA withdrawals are taxed as ordinary income, pensions are often taxable, and you’ll still pay property taxes, sales taxes, and possibly state income tax on investment gains.

Many retirees are shocked to learn they’re in a higher effective tax bracket in retirement than they expected.

Adult children buying homes, grandchildren’s college tuition, weddings, or a sibling in financial trouble — generous retirees often spend tens or even hundreds of thousands helping family.

One survey found that 62% of retirees provided financial support to family members, with an average of more than $6,500 per year. These gifts are rarely budgeted for.

Fidelity estimates a 65-year-old couple retiring in 2025 will spend $345,000 on healthcare throughout retirement — and that excludes long-term care, most dental work, hearing aids, and over-the-counter drugs.

Medicare Part B and D premiums, deductibles, and co-pays add up fast, especially if you need specialists or brand-name drugs.

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More than half of people turning 65 today will need some form of long-term care. The 2024 median costs:

At a modest 3% average inflation rate, your expenses will roughly double every 24 years. That means if you need $80,000 a year when you retire, you’ll need about $160,000 (in today’s dollars) 24 years later just to maintain the same lifestyle.

Many retirement plans use 2% or less inflation and end up dangerously underfunded.

Even with a paid-off mortgage, you’ll still face:

A major bear market in the first few years of retirement can permanently impair your portfolio. Taking withdrawals during a downturn forces you to sell more shares to generate the same income, leaving less principal to recover when the market rebounds.

Many retirees who were “on track” in 2021 looked very different after 2022’s losses — and a similar crash in early retirement can cut your safe withdrawal rate from 4% to under 3%.

Bottom line: Retirement is more expensive — and riskier — than most calculators suggest. Build in bigger buffers, stress-test your plan against higher inflation and healthcare costs, and consider ways to create rising income streams (dividends, rental properties, delayed Social Security) that can help you stay ahead of these hidden threats.

The more realistically you plan today, the less likely you’ll be forced to downsize your dreams tomorrow.

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