Expecting Expenses To Decline In Retirement? They May Rise (2024)

FAQs

Expecting Expenses To Decline In Retirement? They May Rise? ›

Most expenses don't automatically decrease in retirement. In fact, many are likely to increase over time thanks to inflation. Health care and housing costs may grow as both you and your home require additional maintenance with age. Increased leisure time could lead you to spend more on travel or entertainment.

The common rule about retirement is that you'll need about 70% to 80% of your pre-retirement income to cover your expenses during retirement. More money spent on travel and uncovered medical expenses, as well as unexpected tax bills and more free time to shop, are four big reasons why.

Housing expenses—which include mortgage, rent, property tax, insurance, maintenance and repair costs—remained the largest expense for retirees. More specifically, the average retiree household pays an average of $17,454 per year ($1,455 per month) on housing costs, representing over 35% of annual expenditures.

Among the given options, the expense most likely to decrease for retirees is "Clothing expenses."

Average Retirement Spending

According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.

Average monthly retirement income in 2021 for retirees 65 and older was about $4,000 a month, or $48,000 a year; this is a slight decrease from 2020, when it was about $49,000. In general, monthly income ranges somewhere between $2,000 and $6,000 a month.

The above chart shows that U.S. residents 35 and under have an average of $30,170 in retirement savings; those 35 to 44 have an average $131,950; those 45 to 54 have an average $254,720; those 55 to 64 have an average $408,420; those 65 to 74 have an average $426,070; and those over 70 have an average $357,920.

Data from the Federal Reserve's most recent Survey of Consumer Finances (2022) indicates the median retirement savings account balance for all U.S. families stands at $87,000.

The median income for Americans 65 and older is $50,290. The mean (average) is $75,020. Average annual expenditures for Americans 65 and older are $57,818. The average Social Security retirement benefit check is $1,907 as of January 2024.

What is a realistic retirement budget? ›

Retirement Expenses Vary: The amount needed for retirement varies depending on factors such as age, lifestyle, health, and location. A general rule suggests 80% of pre-retirement income, but individual circ*mstances can significantly impact spending.

That breaks down to monthly spending of just under $4,100 per month. The largest monthly expense was housing, followed by transportation and food. If you're planning to live frugally in retirement, spending under $50,000 a year may sound achievable, but it's not a realistic target for every couple.

Average Non-Social-Security Retirement Income Needs

The annual amount is $32,956.44. Adding a bit of wiggle room, $3,000 per month or $36,000 per year is a good monthly retirement income for a couple to start with.

Social Security offers a monthly benefit check to many kinds of recipients. As of April 2024, the average check is $1,776.73, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.

Based on the 80% principle, you can expect to need about $96,000 in annual income after you retire, which is $8,000 per month.

To be considered wealthy at age 65 or older, you need a household net worth of $3.2 million, according to finance expert Geoffrey Schmidt, CPA, who used data from the 2019 Survey of Consumer Finances (SCF) to determine the household net worth needed at age 65 or older to determine the various percentiles of wealth in ...

If there's a large gap between your regular retirement income and your regular spending in retirement, you'll need to look at the big spending targets that you might be able to reduce, such as housing, transportation, food and contributions.

You likely won't be commuting to work, or buying work clothes or lunches out for business anymore, and in fact there may be some significant savings as well. For example, you may have paid off your mortgage so that your housing costs will be significantly reduced.

Travel. Travel is the most likely expenditure to increase during retirement.

Housing. Housing—which includes mortgage, rent, property tax, insurance, maintenance and repair costs—is the largest expense for retirees.