Many people assume that once they retire, their living costs will go down. And while that's true to some degree, your expenses may not drop to the extent you expect them to. In fact, here are three reasons why retirement may cost you more than you imagined.

1. Medicare leaves lots of coverage gaps

Medicare provides coverage to millions of seniors but doesn't cover everything. Original Medicare won't pay for dental care, vision exams, or hearing aids -- services seniors commonly need year after year.

But these gaps aside, Medicare itself also isn't free. Part B, which covers outpatient care, charges a monthly premium ($148.50 in 2021) that enrollees have to pay. Parts D (prescription coverage) and Medicare Advantage (an alternative to original Medicare) charge their own premiums. There are also deductibles that apply under Medicare, as well as coinsurance for services rendered. All told, healthcare will likely not just eat up a large chunk of your senior income, but also cost you way more than anticipated.

Older woman holding document and typing on calculator while older man seated next to her looks on and takes notes

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2. Homes cost more to maintain as they age

Many seniors manage to pay off their mortgages by the time they retire. If that's the case for you, you might assume that your housing expenses will be minimal. But don't forget that as homes age, they tend to require more maintenance, and repair issues can also pop up. While some seniors are able to do that work themselves, others have to outsource it due to mobility or health restrictions.

Furthermore, just because you've paid off your mortgage doesn't mean you won't have to write out a check for ongoing property taxes. And those taxes have the potential to rise every time your home is reassessed, which, over a 20-year retirement or longer, could be quite often. Some municipalities, in fact, reassess homes every year.

3. Taxes will still apply

When we think about living expenses, we don't tend to include taxes. But when you're a senior, that's a must, because there are a number of key income sources that the IRS has the potential to tax.

If you're housing your retirement savings in a traditional IRA or 401(k), your withdrawals will be subject to taxes, as will most pension payments. Social Security benefits can also be taxable at the federal level if your total income is high enough, and there are 13 states that impose a tax on those benefits, as well. Read up on the taxes you might pay because they're apt to eat into your income.

Try as you may to plan and budget for retirement, your senior years could still end up being more expensive than you'd like them to be. The best you can do in that regard is pad your IRA or 401(k) as much as possible while lining up additional income sources, such as a part-time business you operate yourself as a senior. The last thing you want to do in retirement is spend down your savings too quickly, so the more income streams you secure, the more protection you'll buy yourself.