7 Big Retirement Surprises and What to Do About Them

Solution: Don’t retire before you feel financially ready. Most folks underestimate how strongly they will feel about getting their last paycheck, Anthony says. Going forward, “your income is pretty much set. Your expenses are not going to be set. Taxes don’t go down. Costs don’t go down.”

Jan Buchczik

The best defense against portfolio obsession is to retire only when you’re financially comfortable in your retirement shoes. And not just for your own fiscal sanity, he says. That constant checking “drives your [financial] advisers crazy, too.”

3. Surprise! The kids come back (or the folks move in)

In family life, stuff happens. This is the one retirement surprise that should never be a complete surprise. Whether it’s your adult kids returning to the nest after graduation, a job loss or divorce or your parents moving in for health or financial reasons, it’s critical to be prepared for the possibility, says Jason Parker, president of Parker Financial in Silverdale, Washington, and the author of Retirement Calculator: How Much Money Do I Need to Retire?

Solution: Roll with it. Some retirees genuinely love it when a kid moves back in, especially when grandchildren are part of the bargain. “They get not only more time with their grandkids but supper with them every night,” Parker says.

If space under your roof is tight and the multigenerational household seems like a long-term thing, you might consider adding a so-called accessory dwelling unit (ADU) on your property, provided your city or county permits it and you have the means. These small, detached dwellings on your property typically cost from $60,000 to $225,000, depending on size, according to online home-services marketplace Angi.

4. Surprise! Your first-year spending is through the roof

Plain and simple, most people spend more in the first year of retirement than they ever expected to, says Parker. That’s especially true with prices for many products continuing to rise, albeit at a slower pace than during the inflation spurt of 2021 and ’22. And some costs have kept on spiking: In 2023, the average U.S. rate for car insurance jumped 24 percent compared to 2022, according to Insurify, an insurance comparison shopping site.

But even when inflation is tame, discretionary spending tends to rise in early retirement as folks newly freed from the workaday grind indulge more in things like travel, entertainment and eating out. Parker estimates that people spend 10 to 20 percent more on discretionary items in their early retirement years than they expected to.

Solution: Make a realistic budget. Most folks retire without closely comparing what they want to do with how much it will cost to do it. Building a comprehensive spending plan is a great way to avoid digging yourself into a hole, especially if you can do it with the help of a financial planner, Parker says.

Don’t just add up regular fixed bills like rent, utilities, insurance and taxes — factor in travel and entertainment, too. Err on the side of overestimating rather than underestimating your discretionary spending, Parker advises. If your retirement income doesn’t cover it, you’ll need to be more realistic about your spending (or find a way to bring in more money, like gig work or a part-time job).

5. Surprise! You and your spouse approach retirement differently

If you are married or have a significant other, remember that retirement is not a single decision, says Patrice Jenkins, an organizational psychologist and author of What Will I Do All Day? Wisdom to Get You Over Retirement and On With Living! “If you are in a committed relationship, deciding to retire needs to be a conversation,” she says.

Retirement means that you and your spouse suddenly face the daunting prospect of spending up to 40 extra hours each week together, Jenkins notes. Failing to communicate in advance about how you each envision your retirement years will likely lead to disagreement and disappointment, she says.

Solution: Plan time to be together, and apart. Too much time apart in retirement is not a good thing, Jenkins says, but neither is too much time together. Plan your months, weeks, even days around doing both things you can share and things you each want to do on your own.

“You need a ‘your time,’ ‘my time’ and ‘our time’ plan,” she says. Identify your individual interests as well as those you share as a couple and, critically, give each other time and space to pursue them.

6. Surprise! You have a harder time spending than saving

For many folks, one of the most difficult adjustments in retirement is suddenly flipping the switch from years and years of saving money to years and years of spending money. “It’s really hard to transition from being a saver to spending and seeing your account balance going down,” says Jenkins.

Solution: Trust the plan. Just as creating a budget can help forestall overspending at the start of retirement, developing a solid financial plan can show you when, and how, you can afford to do the things you want to do.

Parker recalls advising a well-to-do retired couple who had long dreamed of taking a 30-day cruise. “The husband really wanted to do this, and the wife thought they couldn’t afford it,” he says. Parker printed out the details of their financial plan to demonstrate that they could.

“It was a dream come true. They would never have taken it if I hadn’t told them it was OK,” he says. “Have a good financial plan so you know that you can spend.”

7. Surprise! You live longer than you thought

Most people expect to die sooner than they do, says Teresa Ghilarducci, a professor of economics at the New School in New York City and author of Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy. That can lead them to plan and save for fewer years of retirement than they’ll have, increasing the risk of outliving their money.

An August 2023 report by financial services company TIAA and the Global Financial Literacy Excellence Center at George Washington University documents Americans’ low “longevity literacy.” Only about a third of U.S. adults they surveyed correctly answered multiple-choice questions about the average life expectancy for a 65-year-old (84 for a man, 87 for a woman) or the probability of a 65-year-old living to 90 (about 30 percent for men, 40 percent for women). Most of the incorrect answers were either “don’t know” or underestimates.

Many people base their expectations on how long their parents or grandparents lived rather than on data, Ghilarducci says. The fallout can be particularly acute for married women, she adds.

“Most married couples spend as if the wife will live just a little bit longer than the husband,” but the gap is often considerably longer, she says. “The surprise is, the widow or divorced woman will [have to] live with a lot less money than the couple thought.”

Solution: Do the research — then overestimate. Retirement security rests largely on building a financial cushion that lasts as long as you do. No one knows exactly how long they’ll live, but there are resources to help you get a better sense of the probabilities and plan accordingly.

One valuable step is to search out actuarial data, like the life tables published annually by the National Center for Health Statistics. Find the average life expectancy for your current age and plan as if you’ll live five years longer, Ghilarducci suggests. That can give you, and your spouse, an extra measure of confidence that your money will last as long as you do.

Another resource is the Actuaries Longevity Illustrator, a tool developed by the American Academy of Actuaries and the Society of Actuaries that estimates the probability of your living to various ages based on your age, gender and overall health. You can also enter information for your spouse to help determine how long you can reasonably expect to live as a retired couple.