Table of Contents
The Real Numbers: What Retirees Actually Spend
The national average spending for retiree households tells a compelling story. According to 2023 data from the Bureau of Labor Statistics, households led by individuals 65 and older spent on average retirement expenses of $60,087 in 2023, a 3.9% increase from the previous year.
This figure provides a baseline, but your personal retirement cost of living will vary significantly based on location, lifestyle choices, and health status.
The Big Three: Housing, Healthcare, and Transportation
For most retirees, these categories represent the bulk of their annual retirement expenses.
Housing Expenses: More Than Just a Roof
Your housing strategy is a cornerstone of your financial well-being. Will you stay in your current home? Is the mortgage paid, or will payments continue? Even without mortgage debt, property taxes, insurance, maintenance, and HOA fees add up. The U.S. Census Bureau notes housing is often the largest expense for older households.
The average retiree household spends $21,445 annually on housing, approximately $1,787 monthly. This includes mortgage payments, property taxes, insurance, maintenance, and repairs.
Healthcare Costs: The Ever-Present Factor
As people age, medical services and insurance premiums typically rise. Medicare provides a foundation for those 65+ in the U.S., but it doesn't cover everything. Out-of-pocket costs for copayments, deductibles, medical supplies, prescriptions, dental, vision, and potential long-term care can be substantial. Planning for these expenses is non-negotiable.
If you are retiring at age 65 today, you might expect to spend around $165,000 on healthcare throughout your retirement, not including long-term care costs.
Transportation: Staying Mobile
Maintaining a car (payments, insurance, fuel, repairs) or using public transportation and ride-sharing services costs money. If your retirement plan includes frequent travel or visiting family, these costs need careful budgeting.
Despite reduced commuting, retirees spend $9,033 annually ($753 monthly) on transportation costs. This covers vehicle ownership, maintenance, insurance, and public transportation.
Everyday Essentials: Food, Utilities, and Personal Care
These daily and monthly expenses form a consistent part of your Retirement Cost of Living.
- Food: Grocery bills might change. Cooking more at home can save money, while dining out more offers social engagement. Retirees spend an average of $7,714 annually ($643 monthly) on food, includes both groceries and dining out.
- Utilities: Electricity, gas, water, internet, and phone services are ongoing costs. Usage patterns might shift.
- Personal Care & Necessities: This includes haircuts, household supplies, and similar items.
The Fun Stuff: Entertainment, Travel, and Hobbies
A comfortable retirement means enjoying life. How much you allocate to entertainment, hobbies, and travel plans significantly influences your overall Retirement Cost of Living. Factoring these desires into your budget from the outset is key, as many prioritize travel in early retirement.
Retirement Cost of Living Comparison Table
| Expense Category | National Average Annual Cost | Percentage of Total Budget |
| Housing | $21,445 | 36% |
| Healthcare | $8,027 | 13% |
| Food | $7,714 | 13% |
| Transportation | $9,033 | 15% |
| Other Expenses | $13,868 | 23% |
| Total | $60,087 | 100% |
Don't Forget Taxes!
Taxes don't disappear in retirement. Income from pensions, 401(k)s, IRAs, and Social Security can be taxable. Property taxes remain a significant factor for homeowners. Some states are more tax-friendly for retirees, offering exemptions or no state income tax. Researching states with the lowest taxes for retirees can be part of your housing strategy if considering a move.
Location, Location, Location: The Geographic Impact
Where you live in retirement can drastically alter your Retirement Cost of Living. The difference between a high-cost urban center and an affordable rural town can be tens of thousands annually.
Many retire to states like Florida or Arizona not just for sunshine, but also for lower housing costs and a reduced tax burden. However, look beyond one factor; a state with low income taxes might have high property or sales taxes.
Factors to Compare When Considering Relocation for Retirement:
| Factor | Considerations | Potential Impact on Retirement Cost of Living |
| Housing Costs | Median home prices, rent averages, property taxes | High (e.g., coastal cities) to Low (e.g., some Midwest/Southern towns) |
| Taxes | State income tax (on retirement income), sales tax, property taxes | Significant variation; some states have no income tax |
| Healthcare | Availability and cost of medical services, Medicare acceptance | Can be higher in areas with specialized care, 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 offers insights into regional costs of living. Don't rely on the national average; examine specific states and towns.
Crafting Your Personal Retirement Budget
How do you determine your Retirement Cost of Living number?
- Track Current Spending: For a few months, meticulously track all current expenses for a realistic baseline.
- Envision Retirement Lifestyle: How will spending change?
- Mortgage paid off? (Reduces housing expenses)
- More or less travel?
- Work-related expenses gone?
- Changes in entertainment/hobby spending?
- Estimate Healthcare Costs: Research Medicare premiums, supplemental plans, and average out-of-pocket expenses for retirees, considering your health.
- Account for Inflation: Today's cost of living won't be the same in 10-30 years. Use a conservative inflation estimate (2-3% annually).
- Consider "What Ifs": Plan for unexpected costs like major home repairs or health issues. A buffer is wise.
- Calculate Income Sources: Estimate income from Social Security, pensions, savings (401(k)s, IRAs), and investments.
- The Gap Analysis: Compare estimated living costs with projected income. A shortfall may require adjusting savings, retirement age, or lifestyle.
To simplify this process, you can also use an online retirement cost of living calculator. These tools can help you estimate your monthly retirement expenses and provide a useful starting point.
Working with an Advisor
Professional guidance becomes crucial when planning for retirement cost of living variations across states and expense categories. An advisor can help analyze your specific situation, recommend appropriate savings strategies, and adjust your retirement plan based on changing circumstances.
Many retirees discover their assumptions about retirement expenses were either too optimistic or overly conservative. Professional advice helps calibrate expectations with reality.
Conclusion
Understanding the components of your retirement cost of living is the first step toward financial empowerment. By moving from abstract averages to a concrete, personalized budget, you transform uncertainty into confidence. Take control of your financial future today by using these insights to build a detailed plan that secures the comfortable retirement you deserve.
Discover your true Retirement Cost of Living with expert guidance. Start Your Free Plan
Sources
- Consumer Expenditure Surveys - U.S. Bureau of Labor Statistics. https://www.bls.gov/cex/
- 2024 Retiree Health Care Cost Estimate - Fidelity Investments. https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2024-retiree-health-care-cost-estimate-as-americans-seek-clarity-arou/s/7322cc17-0b90-46c4-ba49-38d6e91c3961#_edn2#_edn3
- Older Population and Aging - U.S. Census Bureau. https://www.census.gov/topics/population/older-aging.html
- American Community Survey (ACS) - U.S. Census Bureau. https://www.census.gov/programs-surveys/acs
