Understanding the Impact of Unexpected Big Expenses on Budgets in Retirement

When planning for retirement, it's crucial to anticipate and model for major unexpected expenses like replacing a roof, fixing a septic system, or car purchases. Rather than relying solely on a 4% withdrawal rule, setting up sinking funds dedicated to specific big ticket items can provide financial security. By separating these expenses into two categories - known major expenses (like car replacements) and unexpected costs (such as sudden lawsuits or family emergencies), retirees can better prepare for various financial scenarios. Modeling out costs and establishing specific funds for each type of expense is key to financial stability in retirement.