The Most Important Retirement Table You'll Ever See

Financial fears tend to top many people's list of worries about retirement. There's a good reason for that. In retirement, your earned income goes away, and you're forced to rely on your investments, Social Security, and any pension you might have in order to make ends meet.

Those worries are what could make the table below the most important retirement table you'll ever see. It shows exactly how people's spending tends to change as they age. It also showcases the key area (healthcare costs) where seniors tend to spend more than their younger counterparts, and just how much that spending tends to be.

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Typical spending by age bracket

This table contains data compiled by the Bureau of Labor Statistics (BLS) from the 2020 Consumer Expenditure Survey.  It shows what households tend to spend, based on the age of a reference person in the home.

The good news for prospective retirees is that overall costs tend to drop in retirement. Indeed, costs for people deep into their retirement tend to be lower than any other age bracket except for those just starting up their independent lives. If you exclude healthcare costs, seniors age 75 and up tend to spend less than people of any other age bracket, period.

Table by author. Source: Bureau of Labor Statistics  

Those healthcare costs, however, tend to be a large and growing share of people's expenditures as they age. That makes it abundantly clear that seniors have good reason to worry about that category, even as the rest of their expenses may drop over time.

Why these trends make sense

When you think about it, the end-to-end story hangs together. When you're young, you tend to be healthy, but you also have a lot of start-up costs as you begin your independent life. As you raise a family, you have more expenses added to your plate, potentially culminating as your kids go college or trade school.

Once your kids are out of school and leading independent lives, your costs of raising them go away. Likewise, once your mortgage is paid off or if you downsize your home once your kids are gone, housing costs could drop as well. Then, once you stop working, the costs you pay in order to keep your job also go away.

Direct costs of working include things like payroll taxes, commuting costs, a work wardrobe, and the "networking costs" for things like team happy hours and office birthday and wedding parties. Indirect costs of working include household services (cooking, cleaning, household maintenance, and laundry hired out due to having to work).

Put all the pieces together over a typical lifetime, and it's clear why people's expenses -- except for healthcare -- tend to drop as they age. Those costs do tend to rise with age, but as that BLS data shows, falling costs elsewhere tend to more or less offset those higher medical-related costs.

What this means for you

The big benefit illustrated in that chart is that it helps put a reasonable retirement much more in reach. If you're staring down those huge mid-career costs of raising a family and paying a mortgage, it should give you hope that there really is an end in sight. Your total costs of living likely won't escalate forever, and your annual retirement price tag might not be nearly as much as what you're paying today (adjusted for inflation).

In addition, looking at things from a cost perspective rather than a current income perspective can help you get a better handle on exactly how much you'll really need to save. Since typical retirement planning guidelines are based on replacing a certain percentage of your income, you might be relieved to recognize you could get away with less and still have a decent lifestyle.

Remember, too, that you'll likely get something from Social Security. That income will reduce the amount you'll have to cover with your nest egg, which will further reduce the amount you absolutely need to save to cover your core costs of living.

Get started now

If putting those pieces together helps get you past the panic and to a point where you're able to start saving up the nest egg you will need, then that table has done its job well. Regardless of how you get to that spot, though, the most important thing you can do for your future is to save for it now.

As that table shows, the typical retiree household still spends between $40,000 and $53,000 per year (before inflation). The sooner you begin building savings to cover the costs that Social Security won't, the easier it will likely be for you to have that money in place before you need it. So start now, and put yourself on a path to a better financial future.