Suze Orman reveals alarming truth about retirement costs
Many workers spend decades preparing for retirement and growing savings. What often gets less attention are the surprise expenses that can arise after leaving the workforce, and for many retirees, those costs can add up more quickly than expected.
A new study from Boston College's Center for Retirement Research found that 83% of retired households face unplanned expenses in any given year.
Personal finance expert Suze Orman flagged these findings in a February 12, 2026, blog post, warning that too many retirees are exposed to financial shocks they cannot absorb.
Here's what the data reveals about hidden retirement costs and what Suze Orman says you can do about them.
Unplanned expenses consume 10% of retirement income each year
The Center for Retirement Research study, authored by Manita Rao and Anqi Chen, analyzed data from 3,427 retired households tracked through the University of Michigan's Health and Retirement Study from 2000 to 2020.
For a household bringing in $4,000 per month, that translates to roughly $4,800 in bills that were never part of the annual budget.
The study revealed that 40% of retired households lack enough cash to cover even one year of these surprise expenses, leaving them vulnerable to credit card debt, forced asset sales, or premature withdrawals from tax-deferred retirement accounts.
That helps you plan for liquidity versus your income needs
While some households may struggle to set aside money, "even small amounts of savings will help provide some sort of buffer for when these events occur," Chen told CNBC.
Three categories of surprise costs catch retirees off guard
The Boston College researchers identified three primary categories in which unexpected spending clusters among retired households across two decades of federal survey data.
Each category alone may seem manageable, but the cumulative annual burden of all three creates financial pressure that drains savings accounts faster than most retirees anticipate.
Key categories of unplanned retirement expenses
- Rainy day expenses: Car and home maintenance average about $3,300 per year across all retired households when smoothed over the full retirement period.
- Out-of-pocket healthcare: Medical costs Medicare does not cover, including dental, vision, and hearing care, average roughly $4,100 annually across all retired households when smoothed over the full retirement period.
- Family financial assistance: When smoothed over the full retirement period, retired households spend approximately $5,700 per year helping family members with financial needs across all retired households.
Source: Center for Retirement Research at Boston College
These figures represent smoothed averages across all years of retirement, meaning the actual bill in any single year could run significantly higher depending on individual circumstances.
Healthcare expenses, in particular, can spike without warning when retirees face dental procedures, hearing aids, or nursing support that falls outside standard Medicare coverage.
The Medicare Part B premium alone reached $202.90 per month for 2026, the Centers for Medicare & Medicaid Services confirmed, eating further into the already thin margin between Social Security income and monthly expenses.
A large unplanned withdrawal can push a retiree into a higher federal income tax bracket and trigger the Income-Related Monthly Adjustment Amount that raises Medicare Part B premiums for higher-income beneficiaries, the Social Security Administration explained.
Orman's two-layer cash strategy goes beyond standard retirement advice
Most financial professionals recommend three to six months of emergency savings, but Orman has long argued that this standard falls dangerously short of what retirees truly need.
In her blog post, Orman urged every household to build an emergency savings account covering at least eight months of living expenses, calling a full year of coverage an even stronger goal for those who can reach it.
More Retirement:
- Bank of America spotlights 401(k) tips you overlook
- Tennessee tax perks retirees should know
- Key social security updates you need to know for the rest of 2026
What separates Orman's approach from conventional advice is a second layer of cash reserves that sits entirely outside the emergency fund.
Orman recommended that retirees also keep two to three years of living expenses not covered by Social Security in a separate cash position, designed as a buffer against stock market declines.
The purpose of this reserve is to prevent retirees from selling investments during a downturn, giving their portfolios time to recover before they need to draw from them.
Certified financial planner Kristen Beckstead, vice president at First Horizon Advisors, echoed the need for a larger safety net than working adults typically maintain.
Retirees should target 18 to 24 months of essential expenses in accessible savings rather than the standard three to six months, Beckstead told AARP.
Retirement cash reserves deserve the same urgency as portfolio growth
The Boston College findings reinforce a point Orman has made consistently throughout her career, that retirees who treat emergency savings as an afterthought are taking a risk they cannot afford.
If your monthly expenses total $5,000, eight months of emergency savings alone would require $40,000 set aside in a liquid, federally insured account.
Orman's additional two- to three-year cash reserve would add significantly more to that total, depending on how much of your monthly spending Social Security covers.
Orman has urged readers, whether five years from retirement or already collecting benefits, to treat accessible cash reserves with the same level of attention as portfolio growth, citing the Boston College findings as evidence of how easily a fixed income can be derailed by a single year of surprise expenses.
The question is no longer whether surprise costs will arise during retirement, because research confirms they will almost certainly affect the vast majority of households.
Related: Suze Orman, AARP flag a retirement trap
The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
This story was originally published June 3, 2026 at 9:47 AM.