Saving enough for your expected costs in retirement -- housing payments, groceries, and utilities, to name a few -- is already a challenging feat. Add in unplanned expenses, like ER visits, appliance breakdowns, and car accidents, and many Americans face a real danger of running out of money.
While some unexpected expenses in retirement are inevitable, they don't have to destroy your budget. The following three things can help you weather financial emergencies a little bit better.
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1. Car insurance
If you plan to own a vehicle in retirement or even rent one from time to time, you'll need car insurance. It's legally required in nearly every state to get behind the wheel, and failure to comply could result in fines or jail time.
Even worse, if you cause an accident, you'll have to pay for all the bills for yourself and the other driver. This could easily amount to tens or even hundreds of thousands of dollars in damages in a serious accident. That could wipe out a substantial portion of your retirement savings.
Auto insurance takes most of this burden off your back. You'll only have to pay your deductible and then the insurer will pay for the rest, up to the policy limit. Of course, there are premiums, too, but these are easier to budget for. Rates might change over time, but once you know your monthly premium, you can set the necessary funds aside and forget about it until the next policy term.
2. Homeowners or renters insurance
Those who own their own home will likely need to have homeowners insurance if they have a mortgage. And even if you don't, it's still a wise investment. A natural disaster could wipe out your home overnight, and even smaller incidents, like a tree falling on your roof, could still cost tens of thousands of dollars to repair. With homeowners insurance, you only have to worry about meeting your monthly premium and then paying your deductible if you need to file a claim.
It's worth noting that certain natural disasters, like floods and earthquakes, aren't covered under a standard homeowners insurance policy. Those who live in areas at high risk for these disasters may need to invest in additional coverage, like flood or earthquake insurance, to ensure they're fully protected.
Those renting a home in retirement won't need quite as much protection since the building itself should be covered under the landlord's policy. But it's still a good idea to invest in renters insurance to protect your personal property against damage or theft.
3. Personal loans
For unexpected expenses that aren't covered under an insurance policy, a personal loan could be a great alternative to withdrawing a large chunk of your savings all at once. Many personal loan lenders review your income information when determining your eligibility, but it's still possible to get a loan without a job.
These loans don't have collateral, which means you'll pay a bit more in interest than you would for a mortgage or auto loan. But you'll have predictable monthly payments, and you may get some say in how long you have to pay back what you've borrowed.
It's best to shop around and compare rates from a few lenders before deciding which to work with. Keep in mind that you'll pay closing costs as well, which will affect how much you need to borrow.
It's totally fine -- encouraged, actually -- to save a little extra money for emergencies in your retirement accounts. But it doesn't hurt to have contingency plans. Keep the above three things in mind as you move toward retirement, and make sure you think about what you'll do when unplanned expenses arise.
