Unexpected Expenses?

[YVRRocketSurgery]

I read an article about how retirees were able to manage their financials in retirement very well, even with encountering the odd unexpected expense.

I was curious what kind of unexpected expenses the RE members of the forum have been encountering. In the article, I believe its survey found the top unexpected expense were house repairs and dental work but also talked about money to help family, etc. What kind of unexpected expenses are you finding in ER that you didn't budget for or really consider?

 

[mpeirce]

My budget actually has an item for unexpected expenses. It varies from year to year and covers items like (looking at my records) an unexpectedly large vet bill, some roof repairs, a washing machine. One year we barely touched it and so decided we could spend more on a trip we wanted to take.

 

[Hermit]

Yes. Many.

Actually only two.

My son decided to become a professional student on Dad's nickel. (He is on his own now. Delivering pizza to pay the bills.)

Building a house. I am going over the original budget. Don't know by how much, but probably $50,000 to $75,000.

Neither are hurting me too bad financially. I had a bunch of cash set aside because I couldn't tell how much those two items would actually cost. I am withdrawing some cash from my 401k each year to replenish the cash bucket a bit.

 

[Bamaman]

I never expected to support a bipolar daughter and her kids. Deductibles and co-pays on healthcare has also been difficult.

Fortunately an inheritance was more than expected, and has been sufficient to deal with these extras.

 

[W2R]

I read an article about how retirees were able to manage their financials in retirement very well, even with encountering the odd unexpected expense.

I was curious what kind of unexpected expenses the RE members of the forum have been encountering. In the article, I believe its survey found the top unexpected expense were house repairs and dental work but also talked about money to help family, etc. What kind of unexpected expenses are you finding in ER that you didn't budget for or really consider?

I don't really budget for anything. Usually my spending stays about the same. Normally I wait until a month without too many irregular big expenses, to buy big discretionary items.

If I spend a little more than I'd like during one month (or year), then I cut back the next month (or year).

I think the whole concept of "unexpected expenses", is that like hurricanes, you can't reliably predict them, right? So, the way I see it is that it isn't helpful to accumulate data about expenses that you can't predict. They do happen, but no more than they happen before retirement. It helps to have a lot of leeway for discretionary expenses, because this can be diverted to handle the unexpected if/when necessary.

 

[Ronstar]

In 2015, I put in a whole house generator for $5k, and $8k in hardwood flooring in 2016. These weren't really unexpected at the time that I put them in - but they weren't expected at the beginning of the respective years. I haven't encountered major unexpected expenses since we retired, but I did plan for them, realizing that some of the nest egg may need to be shelled out unexpectedly.


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[RAE]

Yes, money to help family has been the biggest unexpected expense, by far. Step-daughter is unmarried and has two small boys, ages 3 and 6. She also never finished college, so has few marketable skills, and not much of a job. If it was just her, I'd probably be much less generous with support, but with the two grandkids, we pretty much have to help out (they are awesome kids). So we bought her a new (used) car recently, and are now in the process of buying a small house for her and the boys (didn't spend a lot on the house, but will have to spend some time over there to make it livable). She will make payments to us for both of these as she can, but I really don't expect to be fully reimbursed for either one in my lifetime. Fortunately, DW and I have always been frugal, and our budget can handle these expenses without really impacting our lifestyle too much.

We've known for some time that we were going to have to do something like this, so it's not a big surprise, but still, it is an expense that I was not really planning for when I retired.

 

[YVRRocketSurgery]

It's kind of interesting that the replies so far generally fall under the buckets of home and family with no discussion under personal health/dental. (And maybe one subcategory of "pet". ) These real example are enlightening.

I don't really budget for anything. Usually my spending stays about the same. Normally I wait until a month without too many irregular big expenses, to buy big discretionary items.

If I spend a little more than I'd like during one month (or year), then I cut back the next month (or year).
<snip>

This is generally what the article I read indicated how most retirees handle unexpected expenses; they just adjust as needed and it works for them.

I think the number crunchers like myself like to try to give everything a bit of a value so we can have a bucket for it. It'd be great if post retirement spend was stable and predictable. I think I see myself like mpeirce who looks like he has a bucket for unexpected expenses/contingency fund which can be reallocated to a splurge if unused for the year.

 

[Rustic23]

I created a spreadsheet. I put every non-recurring expense I could think of on it. In another column I put the cost to do, and number of years before it would need to be done. Dividing the time into the cost let me know how much I would have to save before the money would be needed.

Right now, however, I am ahead of the game. Most of my time choices were short. So I have saved for things that have not occurred. Rather than stop saving, I continue so the contingency account has more in it than I need. I figure that's a good thing, and it should cover any 'Unexpected thing" that might pop up.

Note: When I estimated the replacement cost I used a 4% inflation rate.

Edit: Some items may come due early, others late. For the most part it balances. Medical expenses are in the budget. Some years I have used it, most not. If not used it ends up in savings.

 

[Options]

The $890 root canal/crown in February were unexpected (ouch), as was a bunch of small miscellaneous stuff (clothes, portable heater, new shredder, etc). OTOH, also unexpected is my weekly spending has dropped by a lot (and I'm not exactly sure why, but not complaining), so it has all balanced out.

Only recently have I began to suspect that I most likely overestimated my spending needs in retirement. A good problem to have.

 

[razztazz]

I retired with $30,000 over what I considered my "living stash", specifically because if anything unexpected came up I didn't want any big throws to upset my retirement math.

For years I had nothing of significance come up and the 30 grand became 100 grand. I haven't really had any truly unexpected expenses except for 4 years before Obamacare kicked in I was paying for a family member's medical insurance.

Currently I am having new windows, vinyl siding, and some other stuff done to the house. Not exactly --expected-- and I would rather not have to spend but it's a living expense and I have the money so I don't really consider it a blind-siding, holy cow what am I gonna do?! kind of expense

 

[jim584672]

Dental problems can be a source of major unexpected expenses.

 

[Fedup]

I did a lot of dental work before I retired, same with my husband. El Niño cause a leaky side door on my rental. Unsure how much it cost to repair.


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[scrabbler1]

My 2-week hospital stay last summer caused me to max out the OOP expenses under my ACA Exchange policy. But because I knew how much this would be and it took a few months until I actually received a final bill, I was able to use my accumulated monthly budget surpluses to pay it instead of having to tap into one my "slush funds" designed to pay for large, unforeseen expenses.


For 2016 my added OOP medical expenses will rarely exceed $100 per month so I can easily fit that into my regular budget (as long as I avoid the hospital this year, knock on wood!).

 

[CyclingInvestor]

last year - both cars needed replacing, bathroom needed to be redone after showerpan leaked and rotted floor underneath - $45K

this year so far - crown, implant + crown - $8k, so not as bad.

I had to pull extra $ out of my 'stock' pile to cover it, bringing my withdrawal rate to almost 6% last year, but, that is what it is there for.

 

[DrRoy]

I am not retired yet, but I'm not sure that is relevant. In the last 10 years I have had to: replace a roof, replace a furnace, pay a large tax bill, and replace a car.

 

[athena53]

I think the whole concept of "unexpected expenses", is that like hurricanes, you can't reliably predict them, right? So, the way I see it is that it isn't helpful to accumulate data about expenses that you can't predict. They do happen, but no more than they happen before retirement. It helps to have a lot of leeway for discretionary expenses, because this can be diverted to handle the unexpected if/when necessary.

I agree. I think a lot of the retirees who get into trouble figure that SS will cover their usual expenses: rent or mortgage, food, clothing, a little entertainment, etc. Then the car transmission or the HVAC dies and they have to take on debt.

DH and I moved last year and I've gone through the details in other posts, but we had a pile of surprises in addition to the usual moving costs. We love our new house, but it still had the original 20-year old HVAC system and we had to replace the furnace last year and the A/C this year. The porch enclosure we wanted to do was a lot more expensive than expected, too. We use that room a lot, though, and I'm seeing very happy decreases in utility and other costs with our smaller home. Last I checked, our annualized withdrawal rate over the 2 years since my retirement and was 3.8%, and I haven't even started collecting SS yet, so we should be fine.

Good thing: my dentist sees a root canal in my future!

 

[Corporateburnout]

Dental implant, a root canal and a crown for a out of pocket cost of 9K were unexpected. An HOA association assessment of 2.6K was unexpected as well.

These costs will not affect the overall retirement budget and are within the WR bandwidth.

 

[Danmar]

Home repairs (roofs, AC repairs, painting, deck refinish,etc) and dental for sure. I make sure there is plenty of room in our budget for the unexpected (actually I guess I do expect it). Just put in fixed monthly amounts ($250/500/1000/1500) depending on the category. I would guess the total budget has about 10% padding this way. If I go over even with the padding (usually do) our cash balance can easily absorb.

This is why it is good to have a little extra in the nestegg, no?

 

[languagefan]

I don't know whether this will count as unexpected expense or not!
I had an argument with my previous Spanish bank who despite promises not to, kept taking large commissions for every in and out movement from my account. They were simply controlled by a software that they couldn't manage well. On a last straw day I drew the rest of the money in that account (about 15,000 Euros), and because banks close at 2pm in Spain, I went home with all that money. My flat was robbed that evening, and police didn't even visit my flat to do any investigation and sufficed to printing a piece of report paper.

 

[braumeister]

I suppose I'm overly cautious/conservative, but unexpected expenses are why I have 2-3 years expenses in my cash (easily and quickly obtained) bucket. If something comes up, that amount diminishes for a while. No problem -- that's what it's there for.

Another little mind game I've always played is that whenever I use something like FIRECalc or its cousins, I always enter just 80% of my actual portfolio. That gives me confidence that I'm really OK even if things get sour.

 

[Corporateburnout]

Another little mind game I've always played is that whenever I use something like FIRECalc or its cousins, I always enter just 80% of my actual portfolio. That gives me confidence that I'm really OK even if things get sour.

I over inflate my spending by 10K/year when I use these calculators to give me a peace of mind.

 

[ElizabethT]

I have a hard time understanding 'unexpected expenses' in general. Roofs leak, water pipes explode, appliances break, medical stuff happens, cars need to be repaired and eventually replaces. That is what insurance and accrual buckets are for (or your version of an accrual bucket).

Even divorce happens, which while certainly not expected, could also be withstood via our very conservative fixed expenses run rate.

In general, we plan for the worst even as we hope for the best.

 

[mpeirce]

I have a hard time understanding 'unexpected expenses' in general. Roofs leak, water pipes explode, appliances break, medical stuff happens, cars need to be repaired and eventually replaces. That is what insurance and accrual buckets are for (or your version of an accrual bucket).

Rather than mess with accruals, what I use my reserve category for that. I know the appliances won't last forever, but that the washer happens to breakdown today is "unexpected".

As Donald Rumsfeld might say, replacing appliances is an expected unexpected expense. Then there are the unexpected unexpected expenses like the cat developing a growth that cost some money to get taken car of.

 

[ElizabethT]

As Donald Rumsfeld might say, replacing appliances is an expected unexpected expense. Then there are the unexpected unexpected expenses like the cat developing a growth that cost some money to get taken car of.

I would argue that a pet getting sick should not be an unexpected expense. Unhoped for certainly, but not unexpected.

Edit: Correct me if anyone thinks my figures are off, but when considering adopting our last dog, I used an annual run rate of $1,000 for food, shots, grooming, flea treatments and medical. Unused funds rolled to the next year for 'unexpected' medical expenses. Given the expected lifespan of most cats/dogs, that added up to @$15,000 over the lifetime of the pet.