Living a relaxed and prosperous retirement life is a dream for many people. After turning 70, life may no longer be filled with the pressures of work and raising children, allowing for more comfort and leisure. However, this does not mean that bills will no longer pile up.
Inflation persists, global geopolitical tensions are high, and the outlook for economic development is uncertain. For both those still saving for retirement and those who have already retired, life’s pressures persist. While some retirees may have paid off their mortgages or reduced expenses, costs such as healthcare, home maintenance, and daily expenses continue to accumulate.
Understanding the average monthly expenses of retirees can make it easier to budget and confidently embrace a new chapter in life.
According to data from the Consumer Expenditure Survey (CE) program of the U.S. Bureau of Labor Statistics, the average monthly expenses for retired households are around $5,400, totaling about $65,000 annually. These expenses cover categories such as housing, healthcare, food, transportation, and other essential and non-essential items.
Breaking down the data collected by the Consumer Expenditure Survey (CE) program, here are the typical monthly expenses for retired households:
Housing: $1,851 per month
Approximately one-third of the expenses go towards housing, including mortgage or rent, property taxes, maintenance, homeowners insurance, and utilities.
Transportation: $908 per month
This includes car loans, insurance, fuel, and maintenance costs, which may be higher than expected for many retirees.
Healthcare: $662 per month
This covers expenses like Medicare premiums, co-payments, prescription drugs, and out-of-pocket costs.
Food: $713 per month
Including groceries and dining out.
Utilities and services: $374 per month
Covering gas, electricity, water, internet, and phone services.
These five categories typically make up 75% to 85% of retirees’ monthly expenses.
In addition to necessities, many retirees allocate budget for various activities and shopping to enhance the pleasure and comfort of daily life. Here are some common lifestyle expenses:
Entertainment: $287 per month
Including hobby expenses, travel, dining out, and subscriptions, accounting for about 5% of the monthly budget.
Others (clothing, furniture, housekeeping services): $93 per month
These usually make up a smaller percentage, ranging from 2% to 3%.
Expenses generally decrease as retirees age. According to data from the U.S. Bureau of Labor Statistics (BLS), average total annual spending for retirees drops from $83,379 for those aged 55–64 to $65,149 for those aged 65–74. Retirees may save significant expenses each month as costs decrease, such as paying off mortgages or downsizing housing.
After turning 75, medical needs and related bills tend to significantly increase. Healthcare costs have been rising, with healthcare prices increasing by 3.3% compared to an overall inflation rate of 3% according to Health System Tracker data as of June 2024. Given that these post-retirement expenses often accelerate, planning for the rising costs of healthcare is more critical than ever.
Strategies such as downsizing housing, moving to tax-advantaged areas, or considering reverse mortgages may help reduce expenses.
Closely monitoring cost-of-living adjustments (COLA) and changes in tax brackets can help maintain your purchasing power.
With people living longer now, ensure your retirement savings can last. Achieve this through annuities, diversified account allocations, and wise withdrawal strategies.
For a middle-class retired family around age 70, the average monthly spending is around $5,400, with housing, healthcare, dining, and transportation taking up the majority of the budget.
Understanding the flow of post-retirement funds and how expenses change with age helps retirees better coordinate savings and lifestyle goals, ensuring funds are not depleted too quickly.
Thorough planning, maintaining flexibility, and adjusting based on healthcare and longevity can help retirees have ample financial confidence in their later years.