As you plan for retirement, you'll need to set a series of expectations about what kind of money you'll have and what kind of lifestyle you'll need to fund. However, it's also important to expect the unexpected.
A big part of your retirement planning is anticipating your expenses while in retirement. You can probably envision the activities you’ll most want to pursue once you retire; for many, it’s taking advantage of the time to travel, play golf, volunteer, or join communities of like-minded people. Some of those items cost more than others, but all are relatively easy to estimate and anticipate.
But there are some items that may be more difficult to quantify. Those are the expenses in retirement that may seem to come out of nowhere. If you prepare for retirement with these expenses in mind, you’ll be ready for anything.
Medical expenses. Your lingering connections in the dental industry probably mean you’ll be able to find good ongoing dental care at a reasonable price. But medical expenses may be another thing entirely. Yes, even healthcare professionals like you can be caught off-guard by how much of your retirement income goes into paying for medical expenses. Medicare will cover some basic medical expenses, but as you know from dealing with your own older patients, there are gaps in coverage, including dental care, vision care, and long-term care costs. Also, you need to consider both your own current and future health, and that of your spouse/partner or other family members who may rely on you for help.
As an added step, make sure your life insurance coverage is sound. Consider long-term care insurance, supplemental health insurance, and prescription drug coverage through Medicare Part D. You may never need the extra coverage, but if you’re in a position to put that money away now, you’ll enjoy your long-term good health even more knowing you’re prepared for a worse outcome.
Assistance for children, grandchildren, or elderly parents. When you plan for retirement, you may envision a large inheritance from your family or a successful, highly profitable pro sports career for your child helping boost your retirement income. Perhaps more likely, though, is the opposite scenario. As people live longer and longer, there is a chance you may be caring for your older parents, including some of the medical expenses mentioned above. You may also be asked to help out with money towards weddings, first homes, and other expenses from your children and perhaps their children.
There is no quick-fix solution to this potential issue, and no clear way to prepare for these events, but the key here is to put some contingency income into a liquid investment that is still earning interest but is available for a quick cash-out if you need it. As much as you may like to think it is, your dental practice does not meet the definition of a liquid investment. If much of your retirement plan revolves around your practice, you will need some more liquid investments alongside it.
Home improvement. Chances are, you won’t be blasting out that wall between the kitchen and dining room or adding a new master bedroom suite after you’ve retired. But a home getting a little long in the tooth requires more maintenance than a newer home, including potential expenses in plumbing, a new roof, or a new heating and cooling system. Consider also that even with your added free time, your Bob Vila days may at some point be behind you, and you may be hiring someone else to do even nominal maintenance work.
You can’t plan for all contingencies, for sure, but the important part is that you plan for contingencies at all.