The Real Numbers: What Retirees Actually Spend
The national average spending for retiree households tells a clear story. According to the U.S. Bureau of Labor Statistics, households led by individuals age 65 and older spent an average of $61,432 on retirement expenses in 2024. That is a 2.2% increase from the previous year.1
This figure provides a starting point, but your personal retirement cost of living may vary based on your location, lifestyle choices, and health.
The Big Three: Housing, Healthcare & Transportation
For most retirees, these categories make up a large share of annual expenses.
Housing Expenses: More Than Just a Roof
Your housing strategy plays a major role in your overall finances. Will you stay in your current home? Is your mortgage paid off, or will payments continue? Even without a mortgage, property taxes, insurance, maintenance, and HOA fees can add up. The U.S. Census Bureau reports that housing is often the largest expense for older households.
Some retirees choose to downsize, move to lower-cost areas, or consider options like senior co-housing to find a comfortable place to live. The average retiree household spends $22,193 per year on housing, or about $1,849 per month.2 This includes mortgage payments, property taxes, insurance, maintenance, and repairs.
Healthcare Costs: The Ever-Present Factor
As people age, medical costs and insurance premiums often increase. Medicare provides a base level of coverage for those age 65 and older in the U.S., but it does not cover everything. Out-of-pocket costs such as copayments, deductibles, medical supplies, prescriptions, dental, vision, and long-term care can be significant. Planning for these expenses is non-negotiable.
Access to medical services may also influence where you choose to live. If you are retiring at age 65 today, you may expect to spend around $7,799 each year on healthcare, not including long-term care.2
Transportation: Staying Mobile
Transportation is another ongoing expense. This may include car payments, insurance, fuel, maintenance, or the cost of public transit and ride-sharing services. If you plan to travel often or visit family, these costs should be included in your budget.
Even with less commuting, retirees spend about $9,538 per year, or $794 per month, on transportation.2 This includes vehicle ownership, maintenance, insurance, and public transit.
Everyday Essentials: Food, Utilities, and Personal Care
These regular expenses are a steady part of your retirement cost of living:
- Food: Grocery costs may shift over time. Cooking at home can lower expenses, while dining out may increase them. Retirees spend an average of $7,940 per year, or $661 per month, on food, including groceries and dining out.2
- Utilities: Electricity, gas, water, internet, and phone services remain ongoing expenses. Usage may change depending on your daily routine.
- Personal Care and Necessities: This includes items like haircuts, toiletries, and household supplies.
The Fun Stuff: Entertainment, Travel & Hobbies
Retirement is also a time to enjoy life. Spending on entertainment, hobbies, and travel can shape your overall retirement budget. Many retirees prioritize travel early in retirement, so it helps to include these plans in your budget from the start.
Retirement Cost of Living Comparison Table
| Expense Category | National Average Annual Cost | Percentage of Total Budget |
|---|---|---|
| Housing | $22,193 | 36% |
| Healthcare | $7,799 | 13% |
| Food | $7,940 | 13% |
| Transportation | $9,538 | 15% |
| Other Expenses | $13,962 | 23% |
| Total | $61,432 | 100% |
Don't Forget Taxes!
Taxes do not disappear in retirement. Income from pensions, 401(k)s, IRAs, and Social Security may be taxable. Property taxes remain an ongoing cost for homeowners. Some states are more tax-friendly for retirees and may offer exemptions or no state income tax. Researching states with lower taxes can be part of your housing strategy if you are thinking about moving.
A financial professional can help with realistic projections, investment options, and a retirement strategy that aligns with your goals.
Location, Location, Location: The Geographic Impact
can greatly affect your cost of living. The difference between a high-cost city and a lower-cost rural area can add up to thousands of dollars each year.
Many people retire to states like Florida or Arizona not only for the weather but also for lower housing costs and taxes. However, it is important to look at the full picture. A state with low income taxes may have higher property or sales taxes.
Factors to Compare When Considering Relocation for Retirement
| Factor | Considerations | Potential Impact |
|---|---|---|
| Housing Costs | Median home prices, rent averages, property taxes | High (Coastal cities); Lower (Midwest and Southern areas |
| Taxes | State income tax (on retirement income), sales tax, property taxes | Varies widely; some states do not have income tax |
| Healthcare | Availability and cost of medical services, Medicare acceptance | Can be higher in some areas, but access is key |
| Transportation | Walkability, public transit, car dependency | Lower in walkable cities with good transit |
| Climate | Heating/cooling costs, outdoor activity appeal | Can influence utility bills and lifestyle costs |
| Proximity to Family/Friends | Travel expenses for visits | Can add to or reduce overall costs |
Note: U.S. Census data can provide insight into regional living costs. Instead of relying on national averages, review specific states and cities.
Crafting Your Personal Retirement Budget
How do you estimate your retirement cost of living?
- Track Current Spending: Track your expenses for a few months to create a realistic starting point.
- Envision Retirement Lifestyle: Think about how your spending may change:
- Mortgage paid off? (Reduces housing expenses)
- More or less travel?
- Work-related expenses gone?
- Changes in entertainment/hobby spending?
- Estimate Healthcare Costs: Look into Medicare premiums, supplemental plans, and typical out-of-pocket costs based on your health.
- Account for Inflation: Costs will likely rise over time. Use a modest estimate of about 2% to 3% per year.
- Consider Unexpected Expenses: Plan for home repairs or health-related costs. Setting aside extra funds can help manage surprises.
- Calculate Income Sources: Estimate income from Social Security, pensions, retirement accounts, and investments.
- Review the Gap: Compare your expected expenses with your income. If there is a shortfall, you may need to adjust your savings, retirement timing, or lifestyle.
You can also use an online retirement cost calculator to estimate monthly expenses and get a starting point.
Working with an Advisor
Professional guidance can help when planning for different living costs living costs across states and expense categories. An advisor can review your situation, suggest savings approaches, and adjust your strategy as your needs change. Many retirees find their early estimates were either too high or too low. Guidance can help align expectations with actual costs.
Conclusion
Understanding your retirement cost of living is an important step in preparing for the future. By building a detailed and personal budget, you can replace guesswork with clear direction. Use these steps to create a plan that supports a comfortable retirement.
Sources
- Expenditures: Total Average Annual Expenditures by Age: Age 65 or over. https://fred.stlouisfed.org/series/CXUTOTALEXPLB0407M.
- 2024, Age 65 or Over: Expenditures. https://fred.stlouisfed.org/release/tables?rid=479&eid=1198958#snid=1198959.
