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The Top Five Unexpected Costs of Retirement

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Make space in your portfolio for these added risks.

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Some people see retirement as a chance to sit back and relax, while others take advantage of their newfound time by traveling the globe. Either way you spin it, retirement costs money -- and some of your bills will be unexpected.

Here, investing and money management experts look at the top five expenses that aren't always factored into a retirement budget or investment plan. The good news? Almost all are related to a positive trend: people are living longer, healthier lives.

1. Living Longer
Happy 100th Birthday!

The average life expectancy in the US was 72.6 years in 1975, that rate has jumped to 77.9 years in 2007 (the latest year that data are available), but it's clear that many people are living well into their 80s, 90s, and even 100s. Despite our growing life spans and added vitality, the retirement age has lingered at 65. "This means that many people are going to be retired longer than they were working," says Carl Macko, CFP, president of Synergy Capital in Smyrna, Georgia.

When planning your retirement savings, it's important to consider that you will likely have to live on that money for 25 to 30 years, maybe even more. Rande Spiegelman, CPA, CFP at Charles Schwab recommends planning to have a portfolio that is 25 times larger than what you expect to spend the first year you are retired. That's a hefty chunk of cash, even if everything goes according to plan (which it probably won't). For more on how to create a custom portfolio for a solid retirement plan, see "How to Build an Alternative to Target Date Funds."

Another thing to consider when thinking about retirement is the possibility that it could come earlier than you expected -- plenty of baby boomers were force into early retirement during the past year when their companies downsized.

2. Adult Children With Money Problems
Your empty nest may not stay that way.

The recent recession has probably taken its toll on your 401(k), but you may not have expected the toll it would take on your grown-up child.

As of February, 3.6 million people ages 25 to 34 (about 10.8% of the labor force) are unemployed, according to the US Bureau of Labor statistics. This means that if you're a retired person right now, many of your kids who left the nest years ago may be flocking back home for some parental financial help. A survey done by the Pew Research Center in 2009 shows that 13% of parents surveyed said that one of their kids came back to the nest in the last year.

Put aside how emotionally taxing this would be on all parties involved, and take into consideration the strain this could put on your finances. Kids, even the ones that are all grown up, cost money -- this means higher food and utility costs. It may also mean that you'll take on some of your child's debt, or maybe it just means some extra spending money to help ease their burden.

To protect your own retirement funds while supporting your child, experts suggest setting boundaries concerning the amount of money you're willing to give them and make sure that you agree on a time limit for their stay.

If you're not yet retired, remember that the lessons from this recession can be applied to future downturns, and there's no telling whether a recession will affect your lifestyle and that of your grown-up kids. See also, "Ma & Pa Investor Are Back, But Are They Too Late?"
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No positions in stocks mentioned.

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