The U.S. Bureau of Labor Statistics reports the average U.S. household shelled out $6,440 per month on living expenses in 2023, or $77,280 per year. That's most of the average household income of $80,610.
But how might this spending change once you're retired? You typically don't need to spend as much, for a couple of different reasons. You're no longer commuting to work, for example, or paying for childcare.
With that in mind, here's a rundown of what the average retiree household is spending on major living expenses. Your budget may not look exactly the same, but these figures can serve as a useful benchmark in your own planning.
How U.S. retirees are spending their money
In addition to the overall average mentioned above, the Bureau of Labor Statistics also provides data for a range of age groups. While not every U.S. resident aged 65 and above is guaranteed to be retired, with an average age of 74.2 years, much of this group is beyond their working years.
For this 65 and older cohort, here's what the government says these households are typically spending their money on every month:
| Expense | Amount |
|---|---|
| Housing | $1,045.42 |
| Housing-related costs (utilities, repairs, etc.) | $741.67 |
| Healthcare | $668.92 |
| Groceries | $414.42 |
| Insurance/pensions | $273.08 |
| Cash contributions | $261.00 |
| Entertainment | $241.50 |
| Restaurants | $228.72 |
| Miscellaneous/other | $208.50 |
| Apparel | $107.25 |
| Personal care/products | $64.33 |
| Total | $5,007.25 |
Data source: U.S. Bureau of Labor Statistics.
On an annualized basis this works out to be $60,087 (versus average yearly pre-tax income of $64,326). That's roughly the 20% spending reduction most financial planners suggest retirees can expect once they're no longer working.
There is one noteworthy difference between the typical retiree's household spending and the average worker's, however. While the overall average household may be home to 2.5 people, the average retiree's household has only 1.7 persons. Based on those figures, per-capita expenses can actually go up in retirement. Healthcare costs, for instance, tend to increase later in life.
Plan for the future now
To be clear, your actual retirement expenses will likely differ from the average; they could differ by a lot! But the core question remains: Will you have enough income to cover them?
If you're worried about your finances in retirement, there are steps you can take to improve your readiness. One of the most impactful decisions you can make is to work longer than you originally planned, which gives you more time to save, decreases how long your nest egg must last, and allows you to delay the initiation of your Social Security benefits.
Image source: Getty Images.
While 62 is the most popular age for people to retire, doing so and claiming Social Security right away reduces your monthly benefit by as much as 30% from what you're entitled to collect at full retirement age (66 to 67). Conversely, delaying Social Security past full retirement age can increase your retired worker benefit up to 26%.
However, Social Security alone is unlikely to cover all of your retirement costs, meaning you need to save for retirement on your own. One of the most popular ways to make progress on this front is to participate in your employer's 401(k) plan. Even if you don't love your particular plan's investment options, fund company and retirement plan administrator Fidelity reports that employers chipped in an average of $4,770 into each of their workers' 401(k)s last year thanks to matching contributions. That's on top of each employee's average individual contributions of $8,800.
Other strategies, like moving to an area with a lower cost of living, can also stretch what savings you do have. Regardless of what path you take, the oldest and simplest rule still applies: You must create a budget that sustainably balances your spending and your income, no matter how difficult that may be. Let the average figures above guide your initial planning and then fine-tune your budget as retirement approaches.
