12 Retirement Surprises

Retirement is an incredible life transition filled with optimism. There are dozens of surprises you will encounter throughout your retirement journey, and here are 12 retirement surprises for you to consider.

1. Unexpected New Career or Hobbies

It’s becoming more common for retirees to discover new passions, or even launch new careers in their later years. After decades of working in a particular field, retirement offers the chance to explore different interests. In fact, a study by the Kauffman Foundation found that more than 25% of new entrepreneurs in 2020 were aged 55-64, showcasing that entrepreneurship in retirement is a growing trend. Some retirees take on part-time jobs or start businesses for more money, and other do it to keep busy.

You might find yourself taking on a new hobby such as photography, gardening, or playing an instrument. That are hundreds of ideas on how to spend your retirement days.

2. Rising Healthcare Costs

The cost of healthcare should not be a big surprise, but we often don't plan for it because we are invincible when we start planning our retirement. According to Fidelity Investments, a 65-year-old American couple retiring in 2022 could expect to spend an average of $315,000 on healthcare throughout their retirement. This includes premiums, out-of-pocket expenses, and uncovered medical services. These rising costs can take a huge bite out of retirement savings, particularly for those who underestimated the impact of health issues.

3. Divorce in Retirement

Divorce is no longer just a phenomenon for younger couples struggling with life changes. In fact, the divorce rate for those aged 50 and older has doubled in the past 25 years, a trend often referred to as the Gray Divorce Revolution. According to a 2020 study by Bowling Green State University, 1 in 4 divorces in the U.S. involved couples aged 50 and over. A report by Vanier Institute of the Family highlighted that Canadians aged 50 and older are twice as likely to initiate a divorce than they were two decades ago. With longer life expectancies, many couples find themselves re-evaluating their relationships and personal fulfillment after their children have grown up or they retire.

Divorce can wreak havoc on retirement plans, as assets are divided, alimony payments are often negotiated, and living expenses increase. If your retirement plan was based on a dual-income household, a divorce can throw those calculations off. A study by the National Center for Family & Marriage Research found that the cost of maintaining two separate households can increase overall living expenses by 30-50%, especially in cases where both parties move into new homes.

Pro Tip: If you're navigating a divorce during retirement, it's crucial to review your retirement income. Our blog post on how to protect your 401k in a divorce offers practical advice, and Retirementize can help you run new scenarios based on your post-divorce income.

4. Inflation

The inflation spike of 2022 served as a wake-up call for many retirees as costs of essential goods, from groceries to energy, increased dramatically. According to the U.S. Bureau of Labor Statistics, inflation reached a 40-year high in 2022, with prices rising by 9.1% over the previous year.

For retirees living on fixed incomes or drawing from retirement savings, inflation can quickly eat-away at your purchasing power. Many retirement plans didn’t account for this level of inflation, leaving retirees struggling to make ends meet.

Solution: Make sure your retirement plan accounts for inflation. One common strategy is the four percent rule, which adjusts withdrawals for inflation to preserve your savings.

5. Living Longer Than Expected

Longevity is a double-edged sword in retirement. Obviously, retirees want to live a long and full life. However, the financial implications of outliving your savings can be daunting. Research from the Society of Actuaries found that 50% of retirees underestimate their life expectancy, leading to poor planning. While it’s great to live longer, you’ll need your retirement income to last. Make sure to play-out these scenarios to prepare yourself for the best-case.

6. Your Spouse Passing Away

The death of a spouse is one of the most profound and devastating events a retiree can experience. Beyond the immense emotional toll, the financial implications can be equally overwhelming, making it one of the biggest surprises many retirees face.

You may be overwhelmed with a sense of isolation, loneliness, and even depression. Studies show that bereavement often has a long-term emotional impact on retirees. According to research by the Harvard School of Public Health, widowed individuals over the age of 50 are at a significantly higher risk of suffering from depression, with 16% of surviving spouses reporting symptoms within the first two years of losing their partner. The loss of the daily companionship and the shared plans for retirement can leave surviving spouses struggling to find purpose and joy in their remaining years.

The grief can also manifest physically, contributing to what some researchers call the "widowhood effect," where surviving spouses experience a 48% increased risk of death within the first six months of losing their partner, according to a study published in JAMA Internal Medicine.

Financially, the loss of a spouse can be just as difficult. In many cases, the household income decreases significantly after one partner passes away, particularly if the deceased spouse was the primary earner or held a pension. Additionally, Social Security or CPP survivor benefits often provide less than the original combined benefits, leaving the surviving spouse with a lower income.

A study by the Urban Institute found that widows in the U.S. face a widowhood penalty, where they experience an average 37% decline in income after the death of their spouse. Similarly, in Canada, a Statistics Canada report shows that the financial situation of widows worsens significantly, with 28% of elderly women living below the poverty line within a few years of their spouse's death.

Widows and widowers also face unexpected costs, such as funeral expenses and potential legal fees related to estate management. These financial burdens, combined with the emotional stress, can lead to a crisis if adequate planning hasn’t been done in advance.

This surprise reinforces the importance of planning for the possibility of one spouse passing away during retirement. Ensuring your retirement plan includes survivor benefits, life insurance, and a sustainable income strategy is essential. Using a tool like Retirementize can help you adjust your retirement income projections in case of this eventuality and ensure that the surviving spouse will have the financial security they need.

For more insights on how to prepare financially, check out our blog posts on retirement budgeting and retirement planning mistakes.

7. Family Financial Strain: Parents, Kids, and Grandchildren

Many retirees face financial pressure from many sides, supporting adult children, co-parenting grandchildren and caring for aging parents. As life expectancies continue to rise, many retirees find themselves part of the “sandwich generation” - caring for both their children and their elderly parents at the same time.

Adult Children

Adult children staying home longer or needing financial assistance can take a big chunk out of your retirement savings.

Grandchildren

Many retirees are surprised to find themselves stepping back into a parenting role by caring for their grandchildren. Whether due to financial strain, health issues, or other circumstances, more and more adult children are relying on their parents for childcare or even full-time guardianship of their kids.

While caring for grandchildren can bring immense joy and a renewed sense of purpose, it can also be physically and emotionally exhausting. Many retirees expect to slow down and enjoy their later years, but taking on the responsibilities of child-rearing again can feel overwhelming. It may also limit their ability to pursue hobbies, travel, or other retirement dreams.

A study by AARP found that over 40% of grandparents in the U.S. provide some form of childcare for their grandchildren, whether on a part-time or full-time basis. While many retirees relish the opportunity to bond with their grandchildren, this unplanned responsibility can also lead to stress, especially for those with health issues or limited energy.

Aging Parents

Caring for aging parents can be emotionally taxing, especially during what was supposed to be a period of relaxation and freedom. The role reversal—where the child becomes the caretaker—can bring about feelings of guilt, stress, and even resentment. According to a study by the AARP Public Policy Institute, more than 70% of caregivers for aging parents report experiencing emotional stress, with nearly 40% classifying it as “high stress.” Many retirees may also struggle to balance their own needs with those of their parents, leading to burnout.

In addition to the emotional toll, the caregiving role can consume a large portion of retirees' time. Those who anticipated spending their retirement traveling, pursuing hobbies, or relaxing may find these plans derailed. The National Alliance for Caregiving reports that caregivers over 50 spend an average of 24.4 hours per week caring for aging relatives, essentially turning caregiving into a part-time job.

This double burden, often called the sandwich generation, can derail even the most well-prepared retirement plans.

Pro Tip: Include these scenarios in your retirement planning. Our article on kids staying home longer delves into strategies for managing this. Use Retirementize to assess the impact of these financial demands.

8. Market Crashes or Sluggish Markets

Retirees who depend on investment portfolios for their income can be hit hard by market volatility. A market downturn or sluggish performance can significantly affect retirement savings. The COVID-19 pandemic showed how vulnerable even a robust retirement portfolio could be, with the stock market crashing by 34% in March 2020.

While markets do tend to recover over time, retirees don't always have the luxury of waiting out a downturn.

Action Step: Diversifying income sources is crucial. You can read our blog on rental properties for retirement income as a potential strategy to create income streams that are less volatile than the stock market.

9. Inheritance

While receiving an inheritance might sound like a positive surprise, it can come with pitfalls. Managing an inheritance wisely can be challenging, and without proper financial planning, it could be squandered. The Journal of Family and Economic Issues notes that 33% of Americans spend all of their inheritance within two years of receiving it. If you're counting on an inheritance to fund your retirement, it's essential to plan carefully.

10. Repairs on Car or House

Your home and car are likely two of your biggest assets in retirement, but they can also bring costly surprises. According to HomeAdvisor, the average homeowner spends around $3,192 annually on home repairs and maintenance. For older homes, these costs can be even higher.

These unplanned expenses can disrupt a tight retirement budget, especially if you're already dealing with healthcare costs or market volatility.

Action Step: Consider including a home maintenance fund in your retirement budget, and check out our blog on frugal retirement for tips on keeping costs down.

11. Not Being Able to Stay in Your Home

One of the most unexpected and emotional surprises in retirement can be the realization that you may no longer be able to stay in your home. This could occur for several reasons, including health issues, financial constraints, or the home's practicality as you age.

As retirees age, mobility and health challenges often arise, making it difficult to navigate stairs, maintain the property, or access critical services. Homes that once felt ideal may no longer be safe or convenient. Many retirees are forced to consider downsizing to a single-level home or moving into a senior living facility or an assisted living center. A 2020 study from the AARP revealed that nearly 90% of older adults wish to "age in place," yet many are unprepared for the home modifications needed to do so.

Homeownership can be costly in retirement. Rising property taxes, maintenance costs, and utilities may strain a retiree’s budget, especially if they're living on a fixed income. Market downturns or unexpected expenses—like medical bills—can push retirees to sell their homes and relocate to a more affordable housing option. Without a robust financial plan, these costs can make it difficult for retirees to continue living in their current homes.

Leaving a home where a person has lived for decades can be an emotional and jarring experience. It can feel like leaving behind a lifetime of memories. For many retirees, this surprise can lead to feelings of loss, insecurity, and anxiety about the future.

Plan Ahead: To mitigate the risk of being forced out of your home, financial planning is critical. Tools like the Retirementize income calculator can help assess whether your retirement income can sustain homeownership or if downsizing is a more practical option. Proper planning for healthcare and long-term care costs can also reduce the likelihood of needing to leave your home.

12. Not Being Able to Fulfill Retirement Dreams

Many retirees enter retirement with big plans to travel, play golf everyday, or indulging in hobbies they didn’t have time for while working. Unfortunately, health issues or financial setbacks often prevent these dreams from becoming a reality. The Employee Benefit Research Institute reports that 55% of retirees say their health problems are preventing them from fully enjoying retirement.

It’s important to plan for the possibility that your health may not allow for the active retirement you envision, or that financial constraints may limit your ability to travel. Consider retiring as early as possible to get the most out of your Go-Go Years.

Wrap-It-Up

Retirement is full of both exciting and unexpected moments. While surprises are inevitable, the best way to handle them is to plan ahead. By understanding potential pitfalls—whether they involve healthcare costs, market downturns, or family responsibilities—you can adjust your strategy to ensure a fulfilling and financially stable retirement.

Don’t let surprises throw off your retirement plan. Tools like Retirementize, our online retirement income calculator, can help you assess your financial readiness and plan for various scenarios. Remember, planning is key to turning potential challenges into manageable situations.

For more insights, check out our related blog posts on retire too rich, retirement income vs savings calculator, and retirement planning mistakes.

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