Unexpected retirement expenses can strain senior homeowners

"Researchers found that unexpected costs are the norm, not the exception. In any given year, 83% of retired households experience at least one unexpected expense. These fall into three broad categories: Rainy-day costs, such as major home or vehicle repairs Family-related expenses, including helping relatives or covering emergency travel Health-related expenses beyond routine care Health and home costs are especially common, with each affecting well over half of retirees in a typical year."

"When an unexpected expense hits, the price tag can be steep. Among households that experience a shock, average annual costs total about $7,100. Home and other rainy-day repairs average roughly $3,300. Health-related costs run about $4,100. Family-related events can be even more expensive when they occur, the study found. For planning purposes, the researchers calculated a smoothed estimate the average annual cost spread across all years of retirement, whether or not a shock occurs in a given year. That figure comes to about $6,000 a year for the typical retiree household."

"Put another way, unexpected expenses consume about 10% of annual income for the median retiree. That finding carries a clear message for older homeowners: Emergency savings don't shrink at retirement they shift. Over a 25-year retirement, average surprise costs add up to roughly 2.5 years' worth of income. Not all of that needs to sit in a checking account, but some portion must be readily accessible without penalties or forced sales, researchers said."

Eighty-three percent of retired households face at least one unexpected expense in a given year. Unexpected costs cluster into rainy-day home or vehicle repairs, family-related expenses, and health-related expenses; health and home costs each affect well over half of retirees annually. Age past 65 has little effect on shock frequency; income and socioeconomic factors determine frequency and magnitude. Among households that experience shocks average annual shock costs are about $7,100, with home repairs near $3,300 and health costs near $4,100. Smoothed across all retirement years the typical household averages about $6,000 annually, roughly 10% of median retiree income. Over a 25-year retirement surprises total about 2.5 years' worth of income. Only 58% of older households hold enough cash to cover one average year of unexpected expenses, another 16% could tap IRAs or 401(k)s, and over one-quarter lack funds to cover a single year.

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