Unexpected expenses take 10% of retirees' income, on average, research shows — many don't have enough cash on hand

As you gauge how much income you’ll need to pay for your living expenses in retirement, don’t forget to consider how you’ll cover unexpected costs.

More than 8 in 10 retiree households — 83% — will face unplanned outlays in any given year, according to new research from the Center for Retirement Research at Boston College. Among households that do experience unexpected expenses, the average annual amount spent across retirement is $6,000. Measured another way, the typical household will spend an amount equivalent to 10% of its yearly income.

Yet many households don’t have that available in emergency savings, according to the research. While roughly 58% have enough cash to cover unplanned costs for a single year, around 16% would have to tap their 401(k) or other retirement accounts and the rest — about 27% — would fall short even after using all their cash and retirement assets.

“About 40% of [retired] households do not have enough cash to cover even a single year [of unplanned expenses], let alone their whole retirement,” the research notes.

The research uses data from 3,427 retired households that have been part of the 2000-2020 Health and Retirement Study and the Consumption and Activities Mail Survey, both from the University of Michigan.