Managing Unexpected Expenses in Retirement

Planning for the future requires us to carefully analyze our lifestyles, expenditures, and budgets for future years. But this exercise is hardly a precise science; a lot of these estimates include our best guesses as to how things will work out. It is always possible that unexpected expenses will surprise us, and these surprises can be a lot harder to handle on a fixed income.

One such surprise is the cost of healthcare, although we can hardly call it a “surprise” these days. According to Fidelity Investments, for example, the average 65-year-old couple retiring today will spend about $275,000 on healthcare over the course of their retirement years. And remember, that’s an average. Your expenses could far exceed that amount.

Why such a large figure? You might be shocked to learn that Medicare does not cover 100 percent of healthcare expenses. You will still owe co-pays, be subject to a deductible, and might need “optional” services that don’t feel so “optional” at all!

In particular, the cost of nursing home care can quickly become a strain on your finances. The ripple effects of an illness or injury could also become quite costly. Imagine how your budget would handle the cost of renovations to your home, or the need for a home health care worker.

You might be surprised to learn that your life insurance policy can actually help provide for unexpected expenses. After all, most people think of life insurance payouts as something that only happens after death, to help with expenses like a funeral or leftover debts. But if you choose a life insurance policy that builds cash value, you can withdraw funds from the policy or even take out a loan against its value when needed.

You can take advantage of this option by simply paying more than the policy’s premium each month, and allowing the cash to accumulate within the policy. If you never need the money, then your heirs simply receive a larger inheritance one day.

This option is only available within some types of life insurance policy. If you’re not sure which type of policy you hold, or you’re wondering whether your current policy continues to suit your needs, give us a call. We can help you perform a needs assessment, evaluate your current life insurance policy, and upgrade to a new one if you choose. This simple step can provide you with more security in the future, and prevent unpleasant budgetary problems late in life.