Spending habits can shift quickly in retirement, and small changes can have a big impact over time. Today, more retirees are feeling the pinch from day-to-day expenses that outpace their plans.

• Nearly 1 in 3 retirees spend more than they can afford—a rate almost double that of 2020.²

• Only 59% have at least three months of emergency savings, down 10% since 2022.²

• About 36% face unexpected expenses that strain their budgets.²

Additional things to watch out for include gradual lifestyle upgrades that increase fixed monthly costs, helping family members without adjusting your budget, and rising costs for essentials like utilities, groceries, and transportation.

The good news?

By keeping a close eye on spending patterns and building a flexible budget that includes a cushion for surprises, you can enjoy retirement without sacrificing long-term financial security.

Healthcare costs can be one of the most underestimated expenses in retirement, especially as prices for care continue to rise year after year. Even with Medicare, out-of-pocket costs for premiums, prescriptions, and uncovered services can quickly add up.

• A 65-year-old retiring in 2024 could expect to spend about $165,000 on health care throughout retirement, not including long-term care.³

• A healthy couple retiring at 65 may see annual costs of $14,500, which could grow to $49,300 a year by age 85 with inflation.⁴

• In 2023, the average cost of a private nursing home room was $116,800 a year, with assisted living averaging $68,600.⁵

Additional things to watch out for include long-term care needs that arise suddenly, rising premiums for supplemental insurance, and new diagnoses that require costly treatments.

Including realistic healthcare projections in your retirement plan and reviewing them regularly can help ensure that medical expenses remain manageable and that your savings can support the lifestyle you want.

Housing costs in retirement are not always as stable as many expect. Property taxes, maintenance, and even the costs of relocating can take a larger bite out of savings than planned.

• In 2021, nearly 11.2 million older adults spent at least 30% of their household income on housing, marking an all-time high.⁶

• This reflects a ~15.5% increase in housing cost burdens for older adults when compared to 2016.⁶

• Downsizing or relocating often brings added expenses such as moving costs, closing fees, and HOA dues.

Additional things to watch out for include rising utility bills, unexpected home repairs, and insurance premiums that increase over time.

Planning for both the predictable and surprise costs of housing can help protect your savings and give you more flexibility to make the living choices you want in retirement.

About 50% of parents financially support their adult children on a routine basis. That includes retirees, and it works out to an average of $1,474 a month going out to adult children.⁷

Most of that money pays for essentials, including groceries, cellphone bills, health insurance, medical care, and housing costs.⁷

The tradeoff?

Many parents end up sacrificing their own plans and long-term security to support their adult children. In fact, to continue supporting them:

• 50% say they would deplete their retirement savings.

• 35% say they would retire later.

• 17% would come out of retirement and go back to work.⁷

Good intentions aside, prioritizing this support can take a serious toll, quietly straining retirees' savings and financial independence.

Planning ahead for how and when to offer financial help can make it possible to support loved ones while still safeguarding your own long-term security.

If you don't have a tax strategy in retirement, you could be in for financial penalties, higher costs, and a faster drawdown of your savings.

That can be an issue on multiple fronts, including:

• Required Minimum Distributions (RMDs): Missing an RMD? If you don’t withdraw the full required amount by the deadline, the amount not taken could be hit with a 25% excise tax (although this drops to 10% if corrected within two years).⁸

• Social Security benefits: You can start claiming benefits at age 62. If you were born after 1960, your full retirement age will be 67. Claiming benefits before full retirement age can shrink monthly payments by about 30%. That's a permanent reduction that often forces retirees to draw more from their savings to make up the difference.⁹

• Income-Related Monthly Adjustment Amount (IRMAA): If your income exceeds certain thresholds, your Medicare Part B and Part D premiums can shoot up. The higher your modified adjusted gross income (MAGI) is, the higher those surcharges (IRMMA) could be. That could add hundreds or even thousands to your annual healthcare costs.¹⁰

These tax pitfalls can pile up fast, leaving less savings to do the things you truly enjoy in retirement. Creating a proactive tax strategy before you retire can help you keep more of what you’ve earned and make your money last longer.