Examples of Expenses That Don’t Go Away in Retirement

Retirement often brings the expectation of significantly reduced expenses. While some costs, such as work-related commuting or saving for retirement, may diminish, many fundamental expenses continue, and some can even increase. A realistic understanding of these ongoing financial commitments is important for effective retirement planning, helping individuals prepare for sustained financial needs after employment.

Ongoing Healthcare Expenses

Healthcare costs represent a substantial financial commitment in retirement. Medicare provides considerable coverage but does not cover all medical expenses, leaving retirees responsible for out-of-pocket costs. For 2025, the Medicare Part A inpatient hospital deductible is $1,676 per benefit period, with daily coinsurance of $419 for days 61-90 and $838 for lifetime reserve days if a hospital stay extends. The standard Medicare Part B monthly premium is $185 for 2025, alongside an annual deductible of $257, after which a 20% coinsurance applies to most services. Higher earners may also pay an Income-Related Monthly Adjustment Amount (IRMAA), increasing their Part B and Part D premiums.

Prescription drug costs are covered under Medicare Part D, with premiums varying by plan and income, ranging from $40 to $55.50 monthly. Failing to enroll in Part D when first eligible can result in late enrollment penalties. To cover gaps in Original Medicare, many retirees opt for supplemental insurance like Medigap plans, which help pay deductibles and coinsurance but require a separate Part D plan. Alternatively, Medicare Advantage (Part C) plans bundle benefits and often include an out-of-pocket maximum, which can be as high as $9,350 in 2025, though these plans may have network restrictions.

Long-term care, which includes services like in-home care, assisted living, or nursing home care, is not covered by Medicare and is a significant financial challenge. The costs are substantial, with a semi-private room in a nursing home averaging over $9,277 per month or $111,325 annually in 2024. Assisted living facilities average around $5,900 monthly or $70,800 annually, while in-home care services average about $6,292 per month or $75,504 annually. Long-term care insurance can provide financial protection against these expenses, with premiums varying based on age, health, and desired coverage levels.

Persistent Housing-Related Costs

Even if a mortgage is paid off, housing-related expenses remain a significant part of a retiree’s budget. Property taxes are an ongoing obligation that continues in retirement and can increase over time. While some local jurisdictions offer property tax exemptions or freezes for seniors, these benefits require proactive application. Homeowners insurance premiums are a continuous necessity to protect the property, with average annual costs around $1,300.

Maintaining a home involves regular and unpredictable costs for maintenance and repairs. Experts suggest budgeting annually between 1% and 4% of a home’s value for upkeep, or approximately $1 per square foot. This can translate to $3,000 to $5,000 per year for many homes. Major repairs, such as replacing a roof, can cost between $5,800 and over $13,000, while an HVAC system replacement might range from $4,820 to $12,350. Water heater replacements are a notable expense, costing between $800 and $1,800.

Utility costs are a constant expense for all households. Essential services like electricity, natural gas, water, and sewer average between $380 and $469 per month. When factoring in communication services such as internet, phone, and streaming, the total monthly utility bill can approach $600. For individuals who rent their homes, monthly rent payments remain a primary expense, often subject to annual adjustments.

Everyday Living Expenses

Even without the costs associated with working, day-to-day living expenses remain constant in retirement. Grocery and food expenses continue as a necessity. These costs can fluctuate based on dietary choices and household size.

Transportation costs persist, encompassing fuel, vehicle maintenance, insurance, and registration, even if daily driving decreases. Auto insurance premiums alone can average around $200 per month. For those relying on public transportation, fares contribute to the monthly budget. Personal care items, clothing, and other household essentials are regular purchases that remain part of a retiree’s spending.

Communication services, including internet, phone, and streaming subscriptions, are modern necessities and incur continuous costs. Internet service alone averages around $60 per month. These services contribute to staying connected and accessing entertainment, making them persistent budget items.

Unavoidable Taxes and Other Financial Commitments

Retirement does not eliminate tax obligations, and certain financial commitments continue or even become more prominent. Withdrawals from traditional Individual Retirement Accounts (IRAs), 401(k)s, and pensions are taxed as ordinary income. Taking larger distributions can push retirees into higher income tax brackets.

A portion of Social Security benefits may be subject to federal income tax, depending on a retiree’s provisional income thresholds. Up to 85% of these benefits can be taxable under current regulations. Capital gains taxes apply to profits from the sale of investments, with long-term gains (assets held over one year) taxed at 0%, 15%, or 20%, based on income levels. Short-term capital gains, from assets held less than a year, are taxed at ordinary income rates. Homeowners selling their primary residence may exclude a portion of capital gains, up to $250,000 for single filers and $500,000 for married couples.

Any outstanding debts, such as credit card balances, personal loans, or student loans, require regular payments regardless of employment status. Other insurance premiums beyond home and auto, such as life insurance or umbrella policies, may be maintained for continued protection. Many retirees choose to keep subscription services or club memberships for hobbies, entertainment, or convenience, adding to ongoing financial commitments.