Take a fresh look at your lifestyle.

Will You Spend a Lot More or Less Once You Retire?

Smiling retired woman with money
bxTT / Shutterstock.com

Editor’s Note: This story originally appeared on NewRetirement.

Do you actually know how much you spend every day now? What about every week?

Throughout your life, you have probably at least looked backward to assess how much you have spent, even if it is just a running tally in your head. However, figuring out much you will consume in the future can be a lot more complicated.

Do you have any idea of what your average retirement spending will be over the 20 to 30 years you will be living a life of leisure in retirement?

The odds are that you probably haven’t quite yet figured that out. However, it is useful to know. How much you want to spend is the key determinant to a huge number of important retirement planning questions: how much savings you need, how those savings should be invested, and more.

You are probably curious about how your spending projections compare with everyone else’s, too. Following is a look at average retirement spending and what to expect.

retirement saving
bleakstar / Shutterstock.com

According to data from the U.S. Bureau of Labor Statistics (BLS), average retirement spending in 2019-2020 by households led by someone 65 or over was $48,872. However, it varies tremendously across income levels and ages.

The BLS data also reports average retirement spending by category. On average, households over 65 spend:

  • $4,135 on food consumed in the home
  • $2,001 on food away from home
  • $430 on alcoholic beverages
  • $17,454 on housing, including utilities, furnishings, and maintenance
  • $1,056 on apparel
  • $6,819 on transportation
  • $6,749 on health care
  • $2,366 on entertainment
    • $395 on fees and admissions
    • $1,024 on audio and visual equipment and services
    • $627 on pets, toys, and hobbies (with the majority, $512, of that spending on pets)
    • $320 on other entertainment
  • $608 on personal care
  • $547 on reading and education
  • $213 on tobacco
  • $866 on miscellaneous
  • $2,844 on cash contributions
    • $518 on life and other personal insurance
    • $2,263 on pensions and Social Security

What Do the Experts Say About Average Retirement Spending?

saving income
spaxiax / Shutterstock.com

Most standard economic models assume that over your lifetime, the amount you spend is continuous and relatively stable and doesn’t even drop during retirement. That being said, the rule of thumb used by a lot of financial advisers is to plan on spending 20% less in retirement than you spent while working.

However, research suggests that the 20% rule is not necessarily the best benchmark. And it is important to note that spending does not typically fall by 20% in the first year of retirement and stay steady. The reality for most people is that spending varies over time.

According to the Employee Benefit Research Institute (EBRI), retirement spending varies over an individual’s lifetime.

Average Spending Drops Modestly After Retirement

EBRI research suggests that household spending drops at the beginning of retirement. In the first two years of retirement, median household spending drops by 5.5% from pre-retirement spending levels, and by 12.5% by the third or fourth year of retirement. But the spending reduction slows down after the fourth year.

However, although average spending in retirement fell, a large percentage of households experienced higher spending in the first few years following retirement.

Since Spending Varies, Try Planning in Stages

Seniors happy and relaxed in retirement
Monkey Business Images / Shutterstock.com

Retirement can be broken into stages. And each stage has very different spending patterns.

Stage 1

For many people, the first stage of retirement is the transition to retirement. In the transition, you may work part time or switch to a retirement job. For many people, spending during this stage stays roughly the same as it always has been.

Stage 2

This is the stage where you have officially stopped working and the focus is on leisure. During this stage, your spending might increase as you suddenly have a lot of extra time and your time is spent spending money instead of earning it.

Stage 3

As you get older, your health might decline and you may find that you want to slow down. Spending may really decrease during this phase.

Stage 4

For many people, the last two years of life are the most expensive. Long-term care and medical costs spike for most people at the very end. The fact is that dying is very expensive. Some researchers suggest that if you need long-term care at the end of your life, your health care costs might be in the hundreds of thousands of dollars.

Track Your Current Spending and Look Ahead

Senior couple planning retirement expenses
fizkes / Shutterstock.com

To make your money work for you during retirement, you need to track your spending now and make educated guesses about how your spending habits will change.

“A person’s financial success in retirement depends on two key components — savings accumulated during working years, and spending during retirement years,” EBRI writes. “Quantifying these two components and the underlying behavior patterns is essential to understanding how people are likely to succeed in retirement.”

Pay particular attention to the biggest budget items.

Health care

Future health care costs can be difficult to predict, especially when trying to factor in the possibility of a long-term care need.

However, on average, health care is one of the three biggest retirement spending categories and the one area where costs rise consistently as you age.

Fidelity estimates that the average 65-year-old couple will need $300,000 to spend on out-of-pocket health care costs, not including long-term care.

Annually, your health care expenses will rise as you age. Fidelity reports the following annual health care costs by age per person:

  • $3,959 per year for those under age 55
  • $5,647 per year for those 55-64
  • $6,463 per year for those 65-74
  • $6,415 per year for people over 75


Your housing costs could plummet in retirement if you get your mortgage paid off, downsize, or get a reverse mortgage.

And the data on average housing expenditures by age suggests this to be true for most households. Annual housing expenses trend lower as you age. The average housing expenses are:

  • $21,108 for those under 55
  • $19,119 for those 55-65
  • $16,959 for those 65-74
  • $14,542 for those older than 75

Transportation, Leisure, and Family

A few things to think about regarding retirement spending:

  • Transportation costs might go down as you spend less gas on commuting. However, transportation is usually costlier than even health care in retirement.
  • How old are your kids? Will you need to fund any big expenses for them? What about aging parents? Will they rely on you for assistance as they age?
  • What are your leisure plans? Are they costly?

Create a Retirement Plan That Personalizes Your Own Anticipated Spending

Image Point Fr / Shutterstock.com

The research is clear — different people have vastly different spending habits in retirement. You cannot create a solid retirement plan by relying on someone else’s assumptions. You need a retirement plan that fits your own spending.

The NewRetirement Planner enables you to put in different retirement spending levels for different stages of your life. This can give you a much more accurate retirement plan. The system also helps you get a personalized estimate for your future medical costs.

Best of all, the system is designed for you to create and maintain your retirement finances. So, as your plans change, you can update your information and get a complete analysis of how much money you have and how much you will need to stay financially solvent.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More