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4 costs retirees underestimate

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You've carefully planned for retirement and the costs you'll need to cover after you've stopped working: monthly bills, housing, food, and health insurance. But there are other surprising expenses for which most retirees don't budget enough, or at all, such as travel, medical care, and grandchildren.

A financial expert shares the most commonly underestimated expenses, plus offers ideas on how to figure out what you'll need for each.

1. Inflation

A dollar today isn't worth what it was 20 years ago, and in 20 years, it won't be worth what it is today. "A lot of retirees think of all things in terms of today's dollar," says Josh Alpert, founder and president of Alpert Retirement Advising in Southfield, Mich.

Most planners use a 2 percent per year guide, but to really drive home what a difference inflation makes, Alpert suggests looking back at what a dollar today could buy in 1980, 1990, 2000, and 2010 to see how much it's eroded. Now, adjust your savings plan according to what you'll need in 2040, not 2020.

2. Cost of living after a spouse's death

When a spouse dies, especially if that spouse was earning a pension, the surviving spouse's incoming money can be drastically slashed. Instead of a full pension and two Social Security benefits providing income, the surviving spouse could be left with a pension's survivor benefit and one Social Security income. "How to fund retirement for a surviving spouse, especially if one spouse worked less than the other pre-retirement, must be part of a solid retirement plan," says Alpert.

3. Children (and grandchildren)

Just because your kids have moved out and moved on with their lives doesn't mean they won't ask you for money — for themselves or their kids. "It's a situation where you anticipate the best," says Alpert. But the unexpected happens: A child gets divorced and asks for help to make ends meet; a grandchild's school tuition is more than a budget allows. Alpert has even seen retired parents taking out mortgages to help their kids buy homes. Alpert says he's found it very hard for his clients to say no, and he suggests leaving room in your family's budget for unexpected expenses when planning for retirement.

4. Budgets

The last big mistake Alpert sees is retirees spending more than they can afford, especially early on in retirement. "Some retirees fail to take into account how rigid they're going to have to be to stick to a plan," he says. Not only can this jeopardize their future income, but it can also create mental distress. Making a plan — and sticking to that plan — eases that stress and ensures that you'll have enough to see you through the end of your golden years.

Discuss your retirement goals, needs and expenses with a financial professional. Together you can develop a plan to help account for the expected and unexpected costs, so your retirement plans don’t get derailed.

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