Our HOA is charging us thousands of dollars to fix a broken elevator — how are retired Americans supposed to pay for this?

1. Anticipate extra expenses and factor them into your budget

Unless you plan to rent a home in retirement, you have to assume that you’ll face unexpected housing costs. With a standalone home, you might need to pay to replace the heating system. In a condo, you and your fellow HOA members might have to fork over money to put in new elevators.

In setting up your retirement plan, create a line item in your budget for extra housing expenses so you’re allocating money for those surprises every month. Money you don’t end up using in a given month can continue to sit in your savings until you need it.

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2. Keep two years’ worth of expenses in cash

The average American aged 65 to 74 has about $609,000 in retirement savings accounts, according to the Federal Reserve. But you shouldn’t allow your entire nest egg to sit in stocks and other investments whose value can change from one day to the next.

In retirement, you’re living off of your savings, which means some of that money needs to be accessible to you in cash form. Financial experts generally recommend leaving yourself with one to two years’ worth of living expenses in cash in case the stock market experiences a prolonged slump, or your other investments lose value for an extended period of time.

3. Keep a separate emergency fund for emergency repairs

While we typically think of emergency funds as a means to replace income in case you get laid off — which you typically wouldn’t be too worried about when you’re retired — it might be a good idea to maintain a separate account for unexpected housing costs specifically. Especially if you’re the type who appreciates added peace of mind.

As many homeowners know, expensive repairs can pop up at the most inconvenient times. Having a separate fund for these unexpected expenses can prevent you from scrambling to adjust your budget when something comes up — as it is likely to do.

In 2022, the latest year for which this data is available, Americans 65 and older spent 35.2% of their income on housing, according to the Bureau of Labor Statistics. That’s more than health care (13%), transportation (14.1%), and food (12.6%).

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4. Avoid borrowing money to cover expenses

If you don’t have the cash set aside, a surprise home repair or expense might tempt you to tap your home equity. But while borrowing against your home might seem like a reasonable option, there are serious drawbacks to consider.

First, whether you’re taking out a home equity loan, a HELOC, or a reverse mortgage, you’re borrowing money in one shape or form. That means you’re liable for repaying that money. In the case of a home equity loan or HELOC, you’re looking at ongoing monthly payments that might eat into your budget.

With a reverse mortgage, you may not have to pay back your loan in your lifetime. But if you die, your heirs might have to sell your home to repay that loan. They’ll have a set time to either come up with the cash or sell the property. That might be a disappointing outcome if you’d hoped for them to inherit the home originally.

If you don’t have cash savings to tap and it’s a bad time to sell off investments, borrowing against your home equity may be your best option. But if you’re able to access the money elsewhere, that’s usually preferable.