Retirement Planning Isn’t Just About Income — It’s About Preparing for the Unexpected
When most people plan for retirement, they focus on one big question: How much income will I need each month?
That’s an important starting point — but it’s only part of the picture.
What often gets overlooked is how retirees will pay for unexpected expenses. And according to new research, those surprises are far more common than many people realize.
A recent study from the Center for Retirement Research at Boston College found that 83% of retiree households experience unplanned costs in any given year. For those who do, the average annual expense is about $6,000, or roughly 10% of household income.
In other words: unexpected costs aren’t rare. They’re practically guaranteed.
Even more concerning is how few households are truly ready for these financial shocks.
The research shows that:
About 58% of retirees have enough cash to cover a single year of unexpected expenses.
Roughly 16% would need to dip into retirement accounts like a 401(k).
And 27% wouldn’t be able to cover the costs even after using both savings and retirement assets.
Put simply, about 40% of retired households don’t have enough cash to handle even one year of unplanned expenses, let alone several years across retirement.
The study analyzed data from more than 3,400 retired households using surveys from the University of Michigan, tracking spending patterns over two decades.
Unexpected retirement costs typically fall into three categories:
1. “Rainy day” expenses
Think major car repairs, appliance replacements, or home maintenance projects over $1,000.
2. Family-related costs
These can include helping adult children, supporting grandchildren, or dealing with the loss of a spouse.
3. Health-care expenses
Dental work, prescriptions, or medical bills over $500 often arrive without warning.
The researchers estimate that:
60% of retirees will face a rainy-day expense
29% will encounter a family-related financial shock
58% will experience unexpected health-care costs
These aren’t edge cases — they’re part of normal retirement life.
For working adults, financial experts often recommend keeping three to six months of expenses in emergency savings. But retirement is different. There’s no paycheck to replace if something goes wrong.
Instead, retirees must rely on a mix of Social Security, pensions, investments, and savings — all while stretching those resources over what could be decades.
That’s why having accessible cash is so important.
Rather than thinking strictly in terms of “months of expenses,” many financial planners encourage retirees to think about access to cash for surprises — money that’s readily available for medical bills, home repairs, or family needs.
For many retirees, that ends up being about one year of core living expenses, adjusted for guaranteed income sources like Social Security or pensions.
The right amount depends on several personal factors:
Your health
Housing situation
Stability of income
How easily you can access other investments
Someone with steady income and liquid assets may need less cash on hand. Retirees with higher medical risk or fewer flexible investments may need more.
The goal isn’t to stockpile cash — it’s to avoid being forced to sell long-term investments at the wrong time.
Retirement planning isn’t just about replacing your paycheck — it’s about building resilience. Unexpected expenses are inevitable. What matters is whether you’re prepared when they arrive.
Having the right amount of cash on hand gives you flexibility, peace of mind, and protection against making costly decisions during stressful moments.
If you’re approaching retirement — or already there — now is the perfect time to review your savings strategy and make sure you’re ready for life’s surprises.
Because in retirement, confidence doesn’t come from having more money.
It comes from having the right money, in the right places, at the right time.