If you’ve spent time dreaming about how you’ll spend your golden years when full-time work is a thing of the past, the last thing you’ll want is for hidden costs to bring your plans for retirement unstuck. 

Beyond your day-to-day living costs, there are a number of other potential expenses you might need to factor into your retirement budget so you might enjoy the kind of life you want, free from financial worries. 

How much will you need in retirement?  

The size of your retirement nest egg depends on several factors, such as your lifestyle, plans for retirement, and the number of years you’ll spend retired. Everyone’s needs are different, so it’s worth taking the time to work out how much money you might need.

Why do you need to plan for hidden costs in retirement? 

While unexpected expenses can crop up at any stage in life, when you’re no longer working and earning an income, it can be more difficult to find the money to cover them. 

Here are some ‘hidden’ retirement costs that it pays to be aware of. 

Price increases

Calculators that help you estimate your retirement money needs assume the price of everyday goods will continue to increase steadily. However, history tells us that’s not always the case, and economic shocks can happen.

It could be worthwhile building a buffer into your retirement forecasts in the event that everyday living expenses, such as food, housing, petrol, electricity and healthcare increase by more than is expected over time.

Boomerang kids 

With the cost of higher education, house prices having a significant financial impact on younger generations, and people marrying later, adult children are staying at home for longer1. And when they do move out, it’s possible they’ll return several times before finally settling down elsewhere – a phenomenon known as boomeranging. 

Whether it’s feeding and putting a roof over their heads, or helping them out in other ways, many retirees find themselves still financially assisting their adult children.

Taking care of elderly parents

Australians are living longer than ever before, meaning many retirees find themselves in the position of having to look after their parents – either financially or physically, or both. They may have significant living or healthcare costs they’re unable to fully cover.

If there are still adult children at home too, it’s easy to become a ‘sandwich generation’ retiree. Which can be a costly endeavour and will likely mean your retirement savings take a hit.  


Divorce in retirement, known as grey divorce, could have a big impact on your plans for retirement and finances, which could look quite different if you’re no longer part of a couple. 

Aside from any legal fees involved, you’ll need to split any joint assets such as properties and, potentially, your super. A divorce could also have an impact on the age pension payments you’re eligible to receive. 

Unforeseen medical expenses

Advancing age usually comes with some health issues, but whether its medications, hospital stays or specialist appointments, you can’t always predict what – or how expensive – these might be.

While Australia has a good public health system, setting aside money for healthcare costs or maintaining your private health insurance could be the difference between having a health concern fixed quickly or having to live with it for an extended period while the quality of your retirement living suffers. 

Long-term care and other healthcare costs

Financial advisers sometimes talk about spending in retirement being ‘U’ shaped – with high levels of spending initially as people splash out on travel expenses or a new car, which then settles into a more sustainable pattern of spending, before rising again towards the end of life as healthcare costs increase.

So ensuring you have enough money set aside for any long-term care you might need, whether at home or in aged care, could make a big difference to your final years and the level of comfort you’re able to afford. 

Hidden costs in retirement villages

For some people, retirement villages are a popular option for retirement living as they provide a community of like-minded people, low maintenance living, on-site facilities and support services.

But there are many different types of contracts and payment models used by retirement villages, with typical fees including an entry fee, ongoing fees to cover maintenance, services and property management, and an exit fee.

It’s important you fully understand the costs involved and whether these are subject to change over time so you’re not caught out by fee creep or other hidden costs. 


It’s a good idea to be aware of tax implications in retirement such as:

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Important information

Any advice in this article is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature only. It doesn’t consider your personal goals, financial situation or needs. It’s important you consider the appropriateness of any advice and read the relevant product disclosure statement before deciding what’s right for you. 

Taxation issues are complex. You should seek professional advice before deciding to act on any information article.

You can read our Financial Services Guide online for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services it provides. You can also ask us for a hard copy.

AWM Services is part of the AMP group and can be contacted on 131 267 or askamp@amp.com.au.