4 Retirement Expenses Boomers Didn’t Plan for — but Should Have

Contents

Long-Term Care Planning Inflation Social Security and Pension Tax Burdens Estate Plan Updates

There are a few critical expenses that are often inevitable in retirement, and it’s likely that many boomers didn’t plan for them accordingly. These expenses are now coming back to bite them.

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What are they, and how can succeeding generations avoid these often innocent mistakes?

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Long-Term Care Planning

Patrice Williams-Lindo, CEO of Career Nomad, saw just how painfully pricey long-term care for seniors can be while helping both her parents and in-laws navigate aging, illness and end-of-life care.

“I can tell you firsthand: the costs boomers didn’t plan for aren’t just financial — they’re emotional, generational and systemic,” Williams-Lindo said. “My family was quoted over $6,000/month for quality assisted living in Georgia. Multiply that over a few years and you’re talking hundreds of thousands of dollars — money most didn’t save because they assumed retirement meant rest; not round-the-clock care.”

Many financial experts, including Jay Zigmont, PhD, MBA, CFP, founder and CEO of Childfree Wealth, agreed with Williams-Lindo that lack of long-term care planning among boomers — and younger generations — is among the worst and costliest mistakes.

“A year in a skilled nursing facility runs $115k, on average. Men will spend 2.2 years in care, and women 3.7,” Zigmont said. “Without a plan to pay for long-term care, the first person that needs care may cause their spouse to go broke.”

Long-term care, whether you pay out of pocket or with a long-term care insurance policy, is incredibly expensive, so it makes sense that so many boomers didn’t bother.

“For a couple that wants to pay out of pocket, I recommend setting aside $500k now,” Zigmont said. “If you are single, you also need to set aside $500k. That may not make sense on the surface, but with a couple, your spouse often provides care for some time, making the total cost lower.”

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Inflation

A common unplanned for expense that Frederick Saide, managing partner at MoneyMattersUSA, Advisory LLC often sees coming back to haunt boomers is inflation.

“I often get the response, ‘That’s not my problem,’” Saide told GOBankingRates. “The assumption is retirement will not last all that long — certainly not 30 or more years — so ‘I won’t have to go through the inflation cycle three or four times’ is the mindset.”

To guide clients, Saide uses the Society of Actuaries Calculator on longevity to help establish both individual and joint life expectancies.

“What I want is an agreement on the time horizon to plan for; otherwise, we won’t have a clear direction on how much money is needed to last, and what the client wants their money to achieve for them,” Saide. “This process is the reality check moment when I show from 2002 to 2023 inflation averaged 5.5%, nearly double the Fed’s 2% target.”

Many boomers made the mistake of not looking too deeply into the fine print of Social Security and required minimum distributions (RMDs). Specifically, they didn’t study the tax aspect.

“Up to 85% of Social Security benefits can be taxed, and RMDs can nudge retirees into higher tax brackets, triggering Medicare surcharges,” said Andrew Latham, CFP, content director at Supermoney.com. “Roth conversions in your 60s can help, but many wait too long.”

Estate Plan Updates

Did you make a will in your 40s and not update it to reflect your needs and wants in your 60s? A lot of boomers make that mistake.

“Many times, people adopt a ‘set it and forget it’ mentality when it comes to estate planning,” said Charles Nemes, co-founder and CEO at Nemes Rush Family Wealth Management. “This can lead to significant damage to the relationships beneficiaries enjoy today, and potentially put money into their hands when it could actually hurt them more than help them. Unfortunately, estate plans seldom reflect the current feelings of those who drafted them years ago because so many things could have changed. For example, a beneficiary may have issues with drugs/gambling/alcohol, or is getting divorced, has a child with special needs, is getting sued, or is in a high-risk profession.”

Nemes recommended reviewing your estate plan at least every five years to be sure it clearly reflects your current knowledge and feelings about each beneficiary.

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