We hear a lot of the same questions over and over. It tends to happen when you’ve been in business as long as we have and you’ve helped as many retirees and soon-to-be-retirees with their planning as we have. We thought it would be a good idea to answer a couple of these questions every week.
Please note this very important fact. Our answers do not take into account your particular investment objectives, financial situation, or risk tolerance and may not be suitable for all investors. Our answers are not financial advice and should not be taken as advice. This material is provided for educational purposes only.
How should I plan for unexpected expenses in retirement?
An unplanned large expense in retirement can do double damage. Not only can it impact your savings in the short-term, replacing those funds can permanently alter your retirement plan for life! So how should you plan for a large unexpected expense in retirement? The easy answer (aka “Don’t have a large unexpected expense”) isn’t ever really an option. Part of retirement planning is about preparing for the irregular, often significant expenses that can disrupt even the best-laid plans. New roofs, major car repairs, helping family members, or unexpected medical and long-term care costs. These aren’t “if” expenses—they’re “when.”
Remember that the vast majority of retirement planning is spent accounting for ongoing expenses. Car payments, electric bills, phone bills, etc. The things you need for daily living and a lot of advisors have a lot of ideas of how to account for these. Large out-of-pocket costs, however, are often ignored by financial advisors and, to make matters even more tricky, they require a different strategy.
A practical approach is to maintain a dedicated reserve fund in addition to your standard emergency cash. While your emergency fund (often one to two years of spending) protects against market downturns, your reserve fund is earmarked specifically for big-ticket items. Many retirees set aside a healthy chunk—something in the neighborhood of $20,000 to $50,000, depending on lifestyle and homeownership needs—for these unplanned expenses.
For healthcare, understand your exposure. Even with Medicare, you’ll face premiums, deductibles, and potential gaps. A Medigap or Medicare Advantage plan can help cap certain costs, but long-term care remains the largest wildcard. Evaluating long-term care insurance or earmarking assets for that possibility is essential.
Timing also matters. Large withdrawals from tax-deferred accounts can trigger higher taxes or even increase your Medicare premiums through IRMAA. When possible, coordinate these expenses with years when your income is lower or use Roth accounts, which generally do not increase taxable income.
Finally, build flexibility into your investment strategy. A portfolio that includes a mix of cash, bonds, annuities, and equities allows you to draw from more stable assets when a large expense arises, rather than selling stocks in a downturn.
The goal isn’t to predict every potential future unexpected expense—it’s to be prepared for whatever comes your way. By planning ahead for the unexpected parts of retirement, you reduce financial stress and preserve the longevity of your overall retirement plan.
What are my healthcare options if I retire early?
Early retirement—that is, retiring before 65—is a dream for many. However, finding healthcare coverage can be a nightmare. Early retirees are not yet eligible for Medicare and they have willingly given up their employer coverage. If you’re planning to retire early and are trying to get a handle on healthcare expenses, understanding your options is critical to avoiding gaps in coverage and unexpected costs.
If you’re a federal employee, good news. If you worked more than five years and held your FEHB coverage for five years, you can continue that coverage into your retirement. While typically not as affordable as Medicare, the coverage is likely going to be less expensive and cover more than anything else you can find on the open market.
If you were privately employed, your primary option is going to be the ACA (Affordable Care Act) Marketplace. If you retire and lose employer coverage, you qualify for a Special Enrollment Period, allowing you to enroll outside the normal open enrollment window. The ACA offers income-based subsidies, which can make coverage more affordable, but understand that many of those subsidies have disappeared in 2026. Still, when applying for income-based subsidies, the key is going to be managing your reported income strategically. If you’re drawing from a Roth IRA or taking withdrawals strategically from taxable accounts, you may keep your Modified Adjusted Gross Income (MAGI) low enough to meet the requirements for premium tax credits—potentially reducing your monthly premiums.
COBRA is another option, allowing you to continue your employer’s group plan for up to 18 months. However, COBRA is typically expensive since you pay the full premium plus administrative fees. It’s usually best as a short-term bridge while you evaluate other options.
Some early retirees have a spouse who continues to work and they can go on their spouse’s plan. But this is completely dependent on the spouse’s employer.
For those with significant assets, a Health Savings Account (HSA) paired with a high-deductible health plan can be powerful. HSAs offer triple tax advantages and can be used for any qualified medical expense, including premiums for certain plans.
The critical mistake early retirees make is underestimating healthcare costs. You can browse the ACA Marketplace at any time, whether you are planning to enroll in ACA insurance or not. In Pennsylvania, the exchange is known as Pennie. Not only can you get an accurate idea of what coverage will cost, you can also research available subsidies and their qualifying terms.
Start exploring options at least six months before retirement. Visit healthcare.gov and pennie.com to understand your marketplace options and potential subsidies. Planning ahead can soothe healthcare nightmares and allow you to pursue early retirement dreams.