A new analysis from the Center for Retirement Research at Boston College finds that nearly all retirees face surprise costs each year — from roof repairs to dental work — and a large share lack the cash to absorb even one year of these expenses.
The result can be financial stress, forced asset sales or tapping into home equity sooner than planned.
The study draws on two decades of federal survey data covering households ages 65 and older who report being retired.
Researchers found that unexpected costs are the norm, not the exception. In any given year, 83% of retired households experience at least one unexpected expense. These fall into three broad categories:
- Rainy-day costs, such as major home or vehicle repairs
- Family-related expenses, including helping relatives or covering emergency travel
- Health-related expenses beyond routine care
Health and home costs are especially common, with each affecting well over half of retirees in a typical year.
Age itself made little difference once households reached 65. Instead, income and other socioeconomic factors shaped how often expenses showed up — and how large they became.
How much the surprises cost
When an unexpected expense hits, the price tag can be steep. Among households that experience a shock, average annual costs total about $7,100.
Home and other rainy-day repairs average roughly $3,300. Health-related costs run about $4,100. Family-related events can be even more expensive when they occur, the study found.
For planning purposes, the researchers calculated a “smoothed” estimate — the average annual cost spread across all years of retirement, whether or not a shock occurs in a given year.
That figure comes to about $6,000 a year for the typical retiree household.
A key benchmark — 10% of income
Put another way, unexpected expenses consume about 10% of annual income for the median retiree.
That finding carries a clear message for older homeowners: Emergency savings don’t shrink at retirement — they shift.
Over a 25-year retirement, average surprise costs add up to roughly 2.5 years’ worth of income.
Not all of that needs to sit in a checking account, but some portion must be readily accessible without penalties or forced sales, researchers said.
Who’s most prepared — and who isn’t
Data shows that only 58% of older households have enough cash on hand to cover one average year of unexpected expenses. Another 16% could manage by also dipping into IRAs or 401(k)s.
That leaves more than one-quarter of retirees unable to cover a single year of surprise costs even after exhausting both cash and retirement accounts.
Lower-income households are especially vulnerable. Only about one-third have enough cash to manage a typical year.
Similar gaps appear among Black and Hispanic households, single women and widows — groups that also tend to have less home equity and fewer financial backstops.
For retirees who own their homes, inadequate emergency savings often leads to hard choices — such as taking on high-interest debt, delaying needed repairs, or tapping home equity earlier than planned through loans or reverse mortgages.
The study’s bottom line is blunt: Unexpected expenses are a permanent feature of retirement, not a rare event.
Without sufficient liquid savings, many senior homeowners risk turning routine surprises into long-term financial setbacks.
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