7 Big Expenses Seniors Must Plan for in Retirement 2026

Why Most Retirees Underestimate What Retirement Actually Costs

In my 20 years of working with retirees as a CPA and Enrolled Agent, the single biggest mistake I see is underestimating expenses. People plan for the life they’re living at 62 and forget that the financial landscape at 72, 82, and 92 looks radically different. Costs shift. Surprises multiply. And inflation quietly erodes purchasing power every single year.

A recent survey found that nearly one in three older adults are depleting retirement savings faster than they expected, driven largely by inflation and rising costs. William Bengen, the financial planner who invented the famous 4% withdrawal rule, recently called inflation retirees’ “greatest enemy.” He’s right—and I’ve watched it play out in client after client’s finances.

The good news? You can plan for these big expenses if you know what’s coming. Below are the seven major costs I tell every client to prepare for, with real numbers and specific strategies for 2026 and beyond. If you want a broader overview of financial shifts this year, check out these 6 retirement must-knows for 2026 that protect your money.

1. Healthcare and Medicare Premiums

Healthcare is the retirement expense that blindsides people the most. According to Investopedia, Fidelity’s most recent estimate shows that an average 65-year-old couple retiring today will need approximately $330,000 to cover healthcare costs through retirement—that’s roughly $165,000 per person.

In 2026, the standard Medicare Part B premium is $185 per month, and that figure has been climbing steadily. High-income retirees pay significantly more through Income-Related Monthly Adjustment Amounts (IRMAA). If your modified adjusted gross income exceeds $106,000 as a single filer, you’re already in a higher premium bracket.

What I Tell My Clients

The year you turn 63, start mapping out your Medicare costs in detail. Visit Medicare.gov and compare Original Medicare plus a Medigap supplement against Medicare Advantage plans. In 2026, Medicare Advantage is facing slower growth and tighter rules, which means some plans are narrowing networks or raising out-of-pocket maximums.

• Budget at least $7,000–$10,000 per person annually for premiums, copays, and out-of-pocket costs
• Review your plan every year during Open Enrollment (October 15–December 7)
• Factor in dental, vision, and hearing—Original Medicare covers almost none of these
• Consider a Health Savings Account (HSA) before age 65 if you’re still eligible; it’s the most tax-efficient way to save for medical costs

2. Prescription Drug Costs

Even with Medicare Part D, prescription drugs represent a significant ongoing expense. The Inflation Reduction Act capped annual out-of-pocket drug spending at $2,000 starting in 2025, which is genuinely helpful. But that cap doesn’t cover monthly premiums, and it doesn’t apply to drugs administered in a doctor’s office under Part B.

I’ve had clients whose single specialty medication—for conditions like rheumatoid arthritis or cancer—cost $8,000 to $15,000 per year before hitting the out-of-pocket cap. Even with the cap, you’re still paying $2,000 plus your Part D premium, which averages around $46 per month in 2026.

Strategies That Actually Help

• Use Medicare’s Plan Finder tool each fall to compare Part D plans based on your specific medications
• Ask your doctor about generic or biosimilar alternatives—savings can reach 80%
• Check whether you qualify for Extra Help (Low-Income Subsidy), which covers premiums and copays for those under certain income thresholds
• If you take expensive drugs, the new $2,000 cap includes a payment smoothing option that spreads costs across 12 months

3. Long-Term Care

This is the expense that keeps me up at night on behalf of my clients. According to the U.S. Department of Health and Human Services, about 56% of Americans turning 65 today will need some form of long-term care. The median cost of a private room in a nursing home now exceeds $108,000 per year. Even home health aides average $60,000–$75,000 annually for full-time care.

Medicare does not cover custodial long-term care. I’ll say it again because most people don’t believe me the first time: Medicare does not pay for ongoing nursing home stays or in-home personal care assistance. It covers short-term skilled nursing after a qualifying hospital stay—typically up to 100 days, with copays starting at day 21.

How to Prepare

• Investigate long-term care insurance before age 60, when premiums are most affordable
• Consider hybrid life insurance/long-term care policies if traditional LTC insurance feels too expensive
• Research your state’s Medicaid eligibility rules—asset protection planning should start years before you might need care
• Explore aging-in-place modifications to your home; staying home with part-time help is dramatically cheaper than facility care

Maintaining your physical health is one of the most powerful financial strategies you have. The connection between healthy habits and aging well in your 60s and beyond directly affects how much you’ll spend on care later.

4. Inflation’s Steady Erosion of Purchasing Power

The 2026 Social Security cost-of-living adjustment (COLA) is projected to be around 2.2%–2.5%, a sharp drop from the 8.7% COLA retirees received in 2023. Senior advocacy groups have expressed worry that this lower adjustment won’t keep pace with the prices retirees actually face—especially for groceries, utilities, and insurance.

Here’s the math that troubles me: if your monthly expenses are $4,000 and inflation runs at 3% annually, you’ll need $5,375 per month in 10 years just to maintain the same standard of living. That’s an extra $16,500 per year. Over a 25-year retirement, even “mild” 3% inflation doubles your cost of living.

Protecting Your Purchasing Power

What I see most often is retirees keeping too much money in low-yield savings accounts or CDs that barely match inflation. While safety matters, a portfolio that doesn’t grow at all is actually losing value every year.

• Keep 2–3 years of expenses in safe, liquid accounts; invest the rest for moderate growth
• Consider Treasury Inflation-Protected Securities (TIPS) and I Bonds as a hedge
• Review your Social Security claiming strategy—delaying benefits to age 70 increases your monthly check by about 77% compared to claiming at 62, and that larger base grows with future COLAs
• Revisit your budget annually, adjusting withdrawal rates for actual inflation, not assumed inflation

For a deeper dive into how inflation is hitting retirees right now, I recommend reading about how inflation is depleting retirement savings and what you can do to protect yours.

5. Taxes in Retirement

Many retirees are shocked to learn how much they owe in taxes. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Up to 85% of Social Security benefits can be taxable if your combined income exceeds $34,000 (single) or $44,000 (married filing jointly). And Required Minimum Distributions (RMDs), which now begin at age 73 under the SECURE 2.0 Act, can push you into higher tax brackets whether you need the money or not.

In my practice, I’ve seen RMDs push retirees into IRMAA surcharges on Medicare premiums—essentially a hidden tax on top of a tax. One client’s $95,000 RMD bumped her into an IRMAA bracket that added $3,200 per year to her Medicare costs.

Tax-Smart Withdrawal Strategies

• Consider Roth conversions between retirement and age 73, especially in low-income years—you pay tax now at a lower rate to eliminate future RMD tax burdens
• Coordinate withdrawals from taxable, tax-deferred, and tax-free accounts to manage your bracket
• Use Qualified Charitable Distributions (QCDs) if you’re 70½ or older—donate up to $105,000 directly from your IRA to charity, satisfying your RMD without increasing taxable income
• Consult the IRS website or a tax professional to understand how provisional income affects your Social Security taxation

6. Home Maintenance and Unexpected Repairs

Your home might be paid off, but it’s far from free. The average homeowner spends 1%–2% of their home’s value annually on maintenance and repairs. For a $350,000 home, that’s $3,500–$7,000 per year. But homes age along with their owners, and a new roof ($10,000–$25,000), HVAC system ($7,000–$15,000), or major plumbing repair can devastate a fixed-income budget.

I often tell my clients that the biggest financial risk isn’t a stock market crash—it’s a $20,000 emergency expense when your only income is Social Security and a modest IRA. According to the Social Security Administration, the average retiree benefit in 2026 is approximately $1,976 per month. After Medicare Part B premiums are deducted, the average retiree brings home closer to $1,791. That doesn’t leave much room for a new furnace.

Building a Home Maintenance Reserve

• Set aside a dedicated home repair fund of at least $5,000–$10,000, separate from your emergency fund
• Get a home inspection even if you’re not selling—identify problems before they become emergencies
• Investigate home warranty plans, though read the fine print carefully on what’s actually covered
• If aging in place is your goal, budget now for accessibility modifications like grab bars, wider doorways, or first-floor bedroom conversions

7. Scams, Fraud, and Financial Exploitation

This might seem like an odd entry on a list of big expenses, but the numbers are staggering. The FBI’s Internet Crime Complaint Center reported that Americans over 60 lost more than $3.4 billion to fraud in 2023—a 11% increase from the prior year. The average individual loss exceeded $33,000.

As a financial professional, I’ve had to help clients untangle the damage from romance scams, fake IRS calls, Medicare fraud schemes, and phishing emails that drained bank accounts. These aren’t small losses. For someone living on $2,000 a month in Social Security, a $30,000 scam loss represents more than a year of income—gone.

Protecting Your Finances From Fraud

• Never give personal financial information to unsolicited callers, even if they claim to be from the SSA, IRS, or Medicare
• Set up account alerts for transactions over a certain dollar amount
• Consider a credit freeze with all three bureaus—it’s free and prevents new accounts from being opened in your name
• Designate a trusted contact on your financial accounts so your broker or bank can reach someone if they suspect exploitation

Fraud targeting older Americans is evolving rapidly. I strongly recommend reading this guide on online scams targeting older adults and how to stay safe for a detailed breakdown of current threats.

Putting It All Together: A Realistic Retirement Budget for 2026

When I sit down with clients to build a retirement budget, we don’t start with income—we start with expenses. Here’s a realistic annual spending breakdown for a single retiree based on the categories above:

• Healthcare (Medicare premiums, copays, dental, vision): $7,500–$12,000
• Prescription drugs: $1,500–$3,000
• Long-term care insurance premiums or self-funding reserves: $2,500–$5,000
• Housing (property tax, insurance, maintenance, utilities): $8,000–$15,000
• Food and household essentials: $5,000–$8,000
• Transportation: $4,000–$7,000
• Federal and state taxes: $2,000–$8,000+
• Fraud/emergency reserve contribution: $1,000–$2,000

That’s roughly $31,500–$60,000 per year for a single person—before any travel, entertainment, gifts, or charitable giving. The average Social Security benefit of approximately $23,700 per year (before Medicare deductions) doesn’t come close to covering the upper range. The gap has to come from savings, pensions, or continued part-time work.

The Bottom Line: Plan for the Expenses You Don’t Want to Think About

The expenses that hurt retirees most aren’t the ones they planned for—they’re the ones they avoided thinking about. Long-term care. A new roof. A Medicare premium surcharge triggered by one year’s RMD. A scam that drains a savings account.

In my experience, the retirees who maintain financial security aren’t necessarily the wealthiest. They’re the ones who looked at these seven expense categories honestly, built buffers, and reviewed their plan every year. If you haven’t done that exercise recently—or ever—2026 is the year to start. The stakes only get higher from here.