Retirement Cost of Living: Budgeting for a Happy Future

Highlights

• The cost of living in retirement comes from many things, like housing, healthcare, and what people spend day to day.
• Housing is a big part of this. Things like property taxes and mortgage payments are often the biggest cost for retirees.
• Prices tend to go up over time. This means older people have to spend more, and it can shape how they use their money.
• Healthcare gets more expensive, too. This includes what people pay for health insurance and for doctor visits, and it often goes up as people get older.
• Planning how you get your money is important if you want to feel safe with your money when you retire.
• Everyday costs like what people eat, how they get around, and their power bills also change. Retirees often spend money in new ways when they stop working.

Introduction

Thinking about your retirement is about more than just dreaming of free time and rest. You need to know what things in retirement will cost. This is important if you want to build a plan you can rely on. You have to think about what you want your days to look like and what you want to do. Then you can figure out how much it will take to keep that way of living. When you write down your costs and make a plan, you set yourself up to feel safe with money. You will feel more at peace knowing you are ready.

Now is the time to really think about how to make your retirement years good. This text goes over the main parts and simple things you can do to help make sure your money will be there for your future.

Retirement Cost of Living in the United States

Average Retirement Spending

Retirement expenses in the United States can change based on things like age and the way you live. The Bureau of Labor Statistics says people who are 65 years old spend about $4,345 each month after they retire. Those who are 75 and older spend around $3,813 per month. Most of the money goes to housing, healthcare, and transportation.

Before you plan for retirement, look closely at how you spend money now. Knowing what you may spend during retirement helps you match your plan with your money goals.

Factors That Affect Expenses

Many people who stop working have money problems because prices keep going up. Housing takes the most money and usually uses more than one-third of what people pay each year. If the home loan is not paid in full, people may have a hard time keeping their money safe for a long time.

Healthcare costs are another thing people have to deal with. Health insurance, doctor visits, and medicine costs go up as you get older. They make up about 13.5% of what people spend each year. Getting regular checkups can help lower the money you pay on medical bills.

Transportation costs can change a lot. Things like public transit, car insurance, and taking care of a car all add up. If you use only one car or use ride-hailing services in areas you can get to easily, it can help you handle these costs. Knowing what makes your costs go up helps you make better choices.

Inflation and Retirement Budgets

Rising Prices and Reduced Buying Power

Inflation keeps making things cost more, so people have less buying power. This can make it hard for people to plan for retirement. The Bureau of Labor Statistics says that every year, people who have stopped working spend more, mostly on healthcare and transportation.

Average household expenses went up by almost 4% in 2023. Changes in the price of necessities like food and utilities can often make people spend more or less. This is why you may see some changes in the way people buy these things during the year.

Strategies to Stay Ahead of Inflation

To keep your money safe when you retire, you should change your plan over time so rising prices do not take away its value. You can help protect your savings by using different types of accounts and by talking with a trusted investment advisor. Getting ready for rising prices early can help you have enough to use when you retire, so you can feel good about your future.

Housing Costs in Retirement

Monthly Housing Expenses

Housing is often the biggest cost that people face when they retire. This cost includes mortgage payments, property taxes, insurance, and the work needed to keep up the home. For many people, these costs can go over 36% of what they spend in one year. Older homes can need more repairs, which makes things even harder for those who pay the bills.

Retirees need to think about if they will move to a smaller home, move somewhere new, or stay where they are. Each choice will affect how much money you spend. To keep living in comfort, be sure you can handle your housing costs as part of your long-term plan with money.

Downsizing vs. Staying Put

Retirees often think about the money they can save by moving to a smaller home. They also think about how nice it is to stay in the same place as they get older. Moving to a smaller place can lower property taxes and what you pay to keep up your home. You may get to move to a new place that costs less, too.

Aging in place lets people stay in their own homes. It helps them keep their old friends and feel part of their community. But it can be costly. Some may have to add ramps or change the layout of their house to make it easier to get around.

Choosing the right path comes down to what you want in life.

Managing Ongoing Costs

Planning for housing costs means getting ready to pay your mortgage, rent, and for things like repairs. When you pay your mortgage in full before you retire, your monthly bills stay steady. This also gives you more ways to use your money.

If you rent a place, it is a good idea to look at your lease and see if you can pay for it over a long time. You should also plan for things like fixing pipes or taking care of the yard. These costs can go up as time passes, so it’s smart to add them to your budget.

Typical Monthly Housing Costs

Use this breakdown to find ways to save money and be sure you feel good and stay secure with your money.

Healthcare and Insurance

Average Healthcare Spending

Healthcare costs usually go up when you retire. This is because the cost of insurance is often high. People who have stopped working spend more than $8,000 each year on health care.

Including healthcare in your retirement plan can help with out-of-pocket costs. Looking at Medicare and extra insurance choices can help keep your money safe. Making preventive care a top goal can also cut down future medical bills.

Medical Costs and Planning

Healthcare can be one of the hardest things to plan for during retirement. Most people who have retired spend about $669 each month on their own medical bills. This money goes to things like insurance premiums, prescriptions, and other services.

To keep surprises low, check what the average costs are for your age. Also, think about needs you may have later, like dental or vision care.

Medicare and Supplemental Plans

Medicare is important for people after they retire, but it does not cover all healthcare costs. Parts A and B give you basic services. But there are still some things that it does not pay for.

Supplemental insurance plans like Medigap help pay for costs that Medicare does not cover. When you look at the premiums and what is covered, you can choose the plan that is best for you.

Everyday Expenses for Retirees

Spending on Food, Utilities, and Transit

Necessities like groceries, household bills, and the cost of going to work make up a big part of retirement budgets. It is important to watch these costs closely:

• Smart food planning and buying in bulk can help you spend less on groceries.
• If you seal your windows and use new energy-saving systems, you will see your utility bills go down.
• Taking public transportation or using your car less can help you keep your transportation costs in check.

Average Monthly Costs

Lifestyle and Discretionary Spending

Discretionary spending can add fun to retirement and help keep your mind healthy. Retired people spend about $242 each month on things like shows, events, and hobbies.

Travel gives you good experiences. You can keep costs low if you plan trips close to home. The way you live, like having pets or joining clubs, will add something nice to your life. But make sure to plan your spending so you do not run into money problems.

Managing Your Retirement Income

How to Create a Budget That Works

To build a strong retirement budget:

• Review your monthly costs. Look at things like house payments, medical bills, and utility bills.
• Include extra spending on trips, fun, and hobbies.
• Plan for price rises because of inflation.
• Keep some money ready for emergencies, like surprise home fixes or doctor visits.

This budget helps you keep your spending under control. It makes sure you do not go over the money you get in retirement.

Adapting Spending Over Time

People think about different things when they retire. At first, they might want to use their money to travel. In the years that come, they often spend more on health care and looking after their home.

Review your budget from time to time. Make changes when your needs change. You can look at moving to a smaller place, try to cut your monthly bills, or spend money in new ways that fit your goals.

Final Thoughts

Planning for retirement means you should know about all the things you will spend money on in this stage of life. When you think about housing, healthcare, and what you spend day to day, you can make a budget that supports you well. If you check your plan often and make changes when needed, you will be ready if unexpected costs come up. This helps you enjoy the retirement you have worked to reach. A good plan now can help you have a happy and stress-free time later. If you ever need help with budgeting or planning your money, it is a good idea to ask a professional.

Frequently Asked Questions

How much money do I need to retire comfortably in the US?

You will probably need around 80% of your income each year before you retire to keep your way of life the same. A money expert can help you figure out what you need and help get your savings in line with that.

What are some common unexpected costs in retirement?

These can be out-of-pocket medical bills that are not paid by Medicare. Property taxes can go up, and there can be big home or car repairs. Sometimes, you may have to travel without warning or deal with family emergencies. All these things can put extra money stress on people.

How can I protect my retirement savings from inflation?

It is good to spread out your retirement savings. You should also check and change your spending often. A registered investment advisor can work with you. They can help you find ways to deal with inflation as time goes on.

Should I consider relocating to reduce retirement expenses?

Moving can make your expenses go down by a lot, especially if you go to states where homes and taxes are less costly. You should always think about how much you can save, but also look at how life will feel in the new place.

What budgeting tools or resources are best for retirees?

Spreadsheets, budget-tracking apps, and retirement calculators can help. A money advisor gives advice made just for you. Their tips help to make sure your income is enough for what you need in retirement.

Written by Christine Benz Updated June 28, 2025 by Albert Fang