3 surprise expenses that could haunt your retirement

0

Even if you plan your retirement well, it is possible to encounter a number of unpleasant surprises once old age is over. Here are three expenses that could strain your finances at various times during your retirement.

1. Social security taxes

Many retirees derive most of their income from Social Security and, for an even larger fraction, it is, at a minimum, a vital part of their income. Anything that reduces these benefits could prevent you from paying your bills.

You may know that claiming Social Security before your full retirement age will result in your benefits being reduced. But you could also lose part of your benefits for another reason: taxes.

Image source: Getty Images.

Seniors are regularly shocked to learn that Social Security benefits are taxable at the federal level. And the income thresholds at which these taxes come into effect are quite modest.

But it’s not just federal taxes you need to worry about. There are 13 states that also tax Social Security, although many, thankfully, offer exemptions for people with low to moderate incomes.

It is important to be prepared for all the taxes you will have to pay on your benefits, especially if you think you will be heavily dependent on them. There are also steps you can take to reduce the risk of your benefits being taxed. Investing for retirement through a Roth IRA, for example, will reduce your taxable income in your older years, which could keep you below taxable thresholds.

2. Health services not covered by Medicare

Seniors generally rely on Medicare for their health care needs. But many don’t realize in advance how many limits there are on what this program covers.

Dental care, eye exams, and hearing aids are some of the common services that Medicare will not foot the bill for. And getting additional insurance won’t help either.

It’s important to be prepared for these expenses so that you don’t scramble to pay for them later in life. One option is to put money into a health savings account in order to have a source of income to tap into for health care costs later in life. Since HSA funds never expire, you can fund a tax-free account during your working years and keep that money until you retire, when you are likely to need it most.

Another option is to consider getting a Medicare Advantage plan instead of sticking with the original Medicare plan. These plans typically pay for dental, vision, and hearing services, and many offer additional benefits that the original Medicare did not.

3. Home repairs

Many people make it a financial goal to pay off their mortgage before they retire so they don’t have to worry about the expense of keeping a roof over their heads.

The only problem is that even cushioned roofs can leak.

Like the people who live there, houses get old and sometimes they need to be repaired. The prices of these projects can be financially devastating for those on fixed incomes. So if you are planning to own a retired home, make sure you have a healthy emergency fund. This way, you won’t need to take out a credit card to cover repairs that can’t be postponed.

When you’re retired, surprise spending can be scary. So don’t let that scare you. Instead, prepare for Social Security taxes, uncovered health insurance expenses, and home repairs. And just as important, make your financial plans ahead of time to reduce your chances of getting hurt by any of them.


Source link

Share.

Leave A Reply