No matter how hard we try, it seems impossible to identify every expense that we might encounter in retirement. We’ve become good at identifying the common expense items which people miss (house maintenance, IT hardware replacement, etc.) but some things are unpredictable – often because they are new types of expenditure (e.g. payment for medical procedures has become common in the last fifteen years, having been rare in the past) and sometimes because we don’t like to think about them (e.g. helping an adult child financially through a marital break up). The last few years, and what we know about the next few years, have taught us that we shouldn’t assume that taxes won’t increase.
We sometimes beat ourselves up for not predicting these items, but a new study suggests we shouldn’t be so tough on ourselves. The study showed that, in any year, 60 percent of all households will face a rainy day shock and 29 percent will have an unexpected family-related expense. The study doesn’t just look at advised clients, and I would hope our clients wouldn’t have such a high incidence of unpleasant surprises!
The study also showed that those with higher incomes tended to have a higher incidence of annual unexpected expenditure. This may be because those with higher income are more likely to own items that are responsible for these spending shocks (property and cars, for example) and have the resources to do something about them. However, the share of these expenses relative to income tends to decrease for those with higher incomes.
The conclusion of the study is that the average household should keep around 2.5 times their expected retirement spending to cover their unexpected expenses for a 25 year retirement. A word of caution here, however – the figures are based on US households, who have much higher medical expenses than us; we may not need as much to cover spending shocks, but we will still need a good buffer. (1)
We shouldn’t feel bad for failing to identify every possible item of expenditure in retirement, but that doesn’t mean we shouldn’t try to plan properly. It may be that we need to have saved more before we can genuinely afford to retire, but that’s better than finding out years later that you couldn’t afford to retire in the first place!
If you would like help planning your spending in retirement, please contact us.
(1) Centre for Retirement Research at Boston College – How much are emergency expenses for retirees and are they prepared – 6th January 2026
Philip Wise | philip@sussexretirement.co.uk
Managing Director and Chartered Financial Planner
This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The information and guidance provided within this guide is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
