What An Average Retiree Spends On Every Month
Most of us have some expectations of how retirement should look like. Some will imagine spending their life with their other half, sipping on their favorite champagne in an exotic location, while others will prefer family-oriented activities such as going to the lake house with their grandkids. But are these retirement plans really possible? Where do they stand when talking about financial reality?
Let’s see how much an average retiree spends each month, and what are the categories that take most of the money from a retiree’s wallet.
According to data from 2016 collected at the Bureau of Labor Statistics, it was found that “older households” run by people of age 65 and older, spend an average of $45,756 a year, or about $3,800 every month. Where does that stand when compared to how much an average U.S. household spends? Actually, retirees spend only about $1,000 less than the average U.S. household.
Of course, spending in retirement depends on many variables, especially the lifestyle a person chooses to have. However, there are some averages the data revealed that we can divide into spending categories.
You would expect most of the expenses to decrease with age, but the BLS data indicates that in some areas life becomes much more expensive as you get older.
Housing – $1,322
Housing is the biggest spending category for all age groups. Even if a retiree might be close to paying off the mortgage, there are still a lot of costs that never disappear even when you have finally paid your home loan. Property taxes, insurance, utilities, maintenance, repairs, and household supplies are some of the expenses that are included in this spending category.
Transportation – $567
Although older people definitely spend less on gas, car insurance, maintenance and repairs, this category is still quite high on the list of expenses. A retiree will spend on average $6,814 annually for transportation, while an overall average of all U.S. households would be $9,000 on the annual basis. This means that older household will spend a one-third less than an average U.S. household each year.
Health Care – $499
In the case of health care spending category, expenses grow as we age. The BLS data shows that this growing trend continues until the 75th year of life, after which the expenses get lower for about $30 each year. Luckily, Medicare might help cover some of the costs here too.
Food – $483
Everybody has to eat right? That’s why it’s no surprise that food makes another big spending category for people of all ages. But how much an average retiree spend on it? It seems that retirees spend about 20% less on food than the average U.S. household. This could be due to less eating out and special retiree deals in the grocery stores.
Personal insurance/pensions – $237
BLS data shows that there are still some expenses when it comes to personal insurance and pensions. People in the household that still have an earned income are required to pay their share of salary to Social Security. Sometimes a certain amount has to be paid to the company pension too.
Cash Contributions- $202
In this spending category is the money we decide to give in order to support someone’s financial status, a cause or charities. All the donations you give fall under “Cash contributions”. The data shows that retirees dedicate $2,429 annually to this category, which is a bit less than $400 more than the number an average household gives away.
Entertainment – $197
Not having to get up early and commute for long hours to the office is one of the perks of being a retiree. So, naturally, an older person would then spend a bit more on having fun, right? In fact, older households spend almost the same amount of money on entertainment than the 25 – 34 age group.