Hidden Costs in Retirement Planning: The Real 2026 Numbers

Most retirement planning focuses on the numbers you already expect: a monthly Social Security check, a savings balance, a withdrawal rate. The costs that actually derail a retirement plan tend to be the ones nobody put on the spreadsheet in the first place.

Why So Many Retirees Get Blindsided

The Employee Benefit Research Institute’s 2026 Retirement Confidence Survey, the 36th annual edition of the longest running study of its kind, found that 2 in 5 retirees said their healthcare expenses turned out higher than expected. Nearly 6 in 10 current workers said healthcare costs are already hurting their ability to save.

That gap is not really about healthcare specifically. It is about a planning process that tends to model the costs that are easy to model, a mortgage payment, a grocery budget, an average monthly spend, while leaving out costs that are lumpy, delayed, or structurally hidden from a normal household budget.

The same 2026 survey found retirement confidence declining for both current retirees and workers still saving, with inflation, debt, housing expenses, and the possibility of future changes to Social Security and Medicare all named as growing sources of worry. Every one of the categories below is a real, specific version of that broader anxiety, with an actual number attached to it instead of a vague sense that something might go wrong.

The sections below walk through the specific costs that show up this way most often, with the current real numbers behind each one. For the broader question of how much you need overall and how to build the budget around it, see our full retirement budgeting guide. This one stays focused on the costs that get left out.

1. Healthcare Costs Beyond What Medicare Covers

Fidelity releases an annual estimate of lifetime healthcare costs for a 65 year old retiring that year, and it has become the most widely cited benchmark in the industry. The 2026 figure is $185,500 per person, or $371,000 for a married couple, up 7.5% from the year before, the sharpest single year jump in the estimate’s recent history.

Inside that $371,000, Medicare Part B and Part D premiums account for 45%, deductibles and coinsurance make up 48%, and prescription costs cover the remaining 7%. What the number leaves out matters just as much: most dental care, over the counter medication, and any custodial long term care are excluded entirely.

For 2026, IRMAA surcharges apply once modified adjusted gross income passes $109,000 for a single filer or $218,000 for a married couple filing jointly. Surcharges range from $81.20 to $487.00 a month on top of the standard $202.90 premium, and Part D carries its own separate surcharge of $14.50 to $91.00 a month.

An HSA remains the most efficient tool available for this category if you still have access to one before Medicare enrollment. Contributions are pretax, growth is tax free, and withdrawals for qualified medical expenses are never taxed, a combination no other retirement account offers.

2. Long Term Care, the Cost Medicare Simply Does Not Cover

This is the category most retirement plans miss entirely, and the confusion usually comes down to a single misunderstanding. Medicare covers short term skilled nursing after a hospital stay. It does not cover ongoing custodial care, the kind of help with daily activities that most long term care actually consists of.

CareScout, the long term care data arm spun out of Genworth, publishes the industry’s benchmark annual survey. Genworth itself ran this survey directly for years before the CareScout brand took over reporting duties, so if you see the older Genworth name cited elsewhere, it is the same ongoing data series, not a discontinued one.

Those are 2025 survey figures. A semi private nursing home room now runs $315 a day, or $114,975 a year, up 2% from the prior year. Assisted living rose 5% to $6,200 a month, or $74,400 a year, and non medical in home caregiving, priced at $35 an hour for roughly 44 hours a week, comes to $80,080 a year.

Cost growth in this category actually slowed in 2025, up just 1.8% overall compared with 9.2% the year before, which is genuinely good news if you are planning around these numbers. It does not change the underlying size of the exposure, only how fast it is growing.

Long term care insurance is one way to transfer this risk, though pricing varies sharply by age, sex, and whether you add inflation protection. A 2025 industry price index puts the average annual premium with inflation protection at $2,200 a year for a 55 year old man and $3,750 a year for a 55 year old woman, covering $165,000 in benefits at purchase, growing to roughly $400,500 by age 85 under a 3% annual increase rider.

Rates for the same coverage profile can differ by up to 29% between carriers, so shopping this specific purchase around is worth real money. Buying earlier, in your 50s rather than your 60s, also locks in a materially lower rate before health changes start affecting eligibility and pricing.

3. Social Security’s Stealth Tax on Its Own Benefits

Since 1984, up to 50% of Social Security benefits become taxable once combined income passes $25,000 for an individual or $32,000 for a married couple. A second tier, added in 1993, makes up to 85% of benefits taxable above $34,000 and $44,000. Both sets of thresholds have sat completely unchanged since the year they were written into law.

Nearly every other part of the tax code adjusts for inflation every year, income brackets, the standard deduction, even the Social Security payroll tax wage base itself. These specific thresholds were deliberately left out of that indexing, a choice Congress made and never revisited.

The Consumer Price Index sat at 100 during the 1982 to 1984 baseline period and had reached 332.4 by April 2026. In real terms, that original $25,000 threshold would need to sit closer to $77,000 today to carry the same purchasing weight it did when the law passed.

The result is that a rule written to affect only the wealthiest tenth of retirees in 1984 now catches roughly half of all Social Security beneficiaries. Nothing about the rule changed. Everything around it did, which is exactly what makes it feel like a hidden cost rather than a known one.

Roth conversions before you start claiming benefits are one of the few real levers here, since money already converted and taxed does not count toward combined income later. Timing withdrawals across accounts with this threshold in mind, rather than pulling from whichever account is easiest, is the practical version of managing it.

4. Investment Fees Quietly Draining the Account

Average expense ratios have actually fallen a lot over the past two decades, from 0.76% in 2000 down to 0.26% in 2024 for the typical equity fund. That progress covers fund level expense ratios only. Total plan level fees, including administrative and advisory costs layered on top, still commonly run 0.5% to 2% of assets a year.

Run the same starting balance, $25,000, growing for 35 years at a 7% average annual return, through two different fee levels and the gap is stark. At a 0.5% annual fee, the balance reaches roughly $227,000. At 1.5%, it reaches only about $163,000, a 28% reduction driven entirely by the extra 1 percentage point of cost compounding for decades.

Across a full career, that drag adds up further. Research on median income, two earner households puts the lifetime cost of investment fees at nearly $155,000, consuming close to a third of what the household’s investment returns would otherwise have been.

5. Inflation’s Slow Erosion of a Fixed Number

US inflation has averaged 3.29% a year going back to 1914, close to the figure most retirement calculators quietly build in as a default. The trouble is that a single average number hides just how uneven the actual path is, from a record 23.7% spike in 1920 to outright deflation in 1921, to 8% in 2022, the highest single year rate in four decades.

Applied to a real household budget, a $50,000 annual spending target today grows to roughly $96,800 in 20 years at that same 3.29% average rate, without a single new expense being added. The number simply buys less every year it sits still, which is exactly why a static spending plan set once at retirement and never revisited tends to run into trouble in its later decade.

Treasury Inflation Protected Securities remain the most direct hedge against this specific risk, since both the principal and the interest payment adjust with the CPI. They will not outperform equities over a full retirement, but for the portion of a portfolio meant to cover a known future spending floor, that is not really the job they are being asked to do.

6. Housing Costs That Do Not Show Up in the Mortgage Payoff Number

Paying off a mortgage before retirement removes the single biggest housing line item, but it does not remove housing costs entirely. Property taxes, homeowners insurance, and ongoing maintenance keep arriving on their own schedule, and all three tend to rise faster than a fixed income adjusts.

A property tax reassessment after years of rising local home values can increase a bill by a meaningful percentage in a single cycle, with no purchase or renovation decision on your part triggering it. Home insurance premiums have also climbed sharply in many states over the past several years, driven by rebuilding costs and, in some regions, insurer withdrawal from the market entirely.

The average homeowners insurance premium jumped 12% in 2025 alone, and forecasters expect another 4% increase in 2026 on top of that, marking a fifth straight year of rising rates. Some states are seeing far sharper increases than the national average, with California, Nebraska, New Mexico, and Georgia all projected for double digit jumps in 2026.

None of this shows up in a mortgage payoff calculation, since it is a cost that continues whether or not the home carries a loan. Shopping insurance coverage every few years, rather than automatically renewing with the same carrier, is one of the few ways to actually push back on the trend rather than simply absorbing it.

Deferred maintenance is the quieter version of this problem. A roof, a water heater, and a home’s major systems all have a finite lifespan, and retirement income arriving on a fixed monthly schedule does not always line up neatly with when a $12,000 roof replacement actually comes due.

7. Lifestyle Drift and Legacy Costs

The first years of retirement often spend more than the plan assumed, on travel, hobbies, and time with family, simply because there is finally time available to spend it. That is not a budgeting failure so much as a predictable pattern, sometimes called the retirement spending smile, where spending is higher early, dips in the middle years, and rises again later as healthcare costs take over.

Gifting to adult children or grandchildren, whether for a down payment, tuition, or simply ongoing family support, is another category that rarely appears in the original plan but shows up in practice for a large share of retirees. A recent survey found 62% of grandparents had provided some form of financial support to adult children or grandchildren in the past 12 months, spending an average of $2,654 a year on grandchildren specifically.

Deciding on a specific, bounded amount in advance keeps generosity from quietly becoming an open ended monthly expense. A separate, smaller trend worth naming directly is the sandwich generation squeeze, where roughly 1 in 6 grandparents are supporting both aging parents and grandchildren at the same time, straining retirement savings from two directions at once.

8. Legal and Estate Planning Costs

A will, a durable power of attorney, and a healthcare directive are the baseline documents most estate attorneys recommend having in place well before they are needed. Drafting or updating them typically costs a few hundred to a few thousand dollars depending on complexity and state, a small cost next to what happens without them.

Without those documents in place, a family can end up in probate court, a public and often expensive process, simply to sort out decisions that a properly drafted document would have settled in advance. Reviewing beneficiary designations on retirement accounts and life insurance at the same time matters just as much, since those designations override whatever a will says.

A 2026 estate planning report found 56% of American adults have no estate planning documents at all, and just 26% currently hold a will, down from 31% the year before. That share has been falling, not rising, even as 73% of respondents in the same survey said estate planning was personally important to them.

The gap between knowing this matters and actually completing the paperwork is exactly the same pattern seen across every hidden cost in this article. The information is not hard to find. It is simply easy to postpone, right up until a family is left sorting it out without you.

Building a Plan That Accounts for What It Cannot See Coming

• Budget a specific, separate line for long term care, even a partial one, rather than assuming it will come out of general savings if it happens.
• Check your combined income against the Social Security taxation thresholds before finalizing a withdrawal strategy, not after filing a tax return.
• Pull your actual investment fees directly from your account statements at least once a year, not from memory or an assumption that they are low.
• Get a real, professional second opinion on your overall plan every few years, particularly around major transitions like a Roth conversion or a Medicare enrollment decision.
• Revisit your spending plan against actual inflation at least annually, rather than setting it once at retirement and leaving it untouched.

None of the categories above are exotic. Every one of them is documented, measured, and updated every year by a named organization, Fidelity, CareScout, EBRI, the Social Security Administration, CMS.

The surprise most retirees experience is not that this information does not exist. It is that it was never built into the plan they made.

Frequently Asked Questions