The average retiree expenditure on housing, food, transportation, and healthcare is an impressive amount. According to the latest Bureau of Labor Statistics data, which is based on 2019 figures, “older households”—defined as those run by someone 65 and older—spend an average of $45,756 a year, or roughly $3,800 a month.
Spending $3,800 a month after tax doesn't sound bad at all, especially if you've got a paid off home and all your kids are independent adults. If you still have debt and kids who can't launch, that's a different story.
The BLS data breaks down the $3,800 a month in average older household spending for us to review. Let's look at the numbers.
Average Retiree Expenditure On Housing, Food, Transportation & Healthcare
Here’s the data shown as a monthly breakdown of how households headed by a retirement-age person spend money, on average, in seven major categories.
Average Retiree Expenditure On Housing: $1,322
Even after paying off your mortgage, you will still have ongoing expenditure including: property taxes, insurance, utilities, repairs and maintenance and household supplies.
But I'm guess the $1,322/month figure includes many retirees who haven't yet paid off their mortgage yet given the median US home price is only about $250,000 as of 2019. A $200,000 mortgage at 4% has a monthly payment of $1,238.
Check the latest mortgage rates online. They’ve got one of the largest networks of lenders that compete for your business. Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible from them or your existing bank.
Average Retiree Expenditure On Food: $483
Given the majority of Americans are obese, you'd think the food expenditure in retirement would be much higher. Yet retirees spend nearly 20% less than the average household does on food, maybe thanks to more home cooking and a realization that they better eat better if they want to live longer.
In Hawaii, where my parents are from, there are plenty of early bird specials for 30% or more off if you get there before 5pm. As a retiree, there are plenty of ways to save.
Average Expenditure On Transportation: $567
People older than 65 do catch a break on transportation costs. The $6,814 annual average outlay, which includes the costs of gas, insurance and maintenance and repairs, is about one-third less than the nearly $9,000 average households of other ages shell out each year.
With the proliferation of cheap rideshares from Uber and Lyft, transportation costs should continue to stay low. My parents are in their 70s and no longer want to drive due to vision and reaction issues. Now they often take Uber pool to get around places due to safety issues.
Average Expenditure On Health care: $499
Health care is the biggest concern for most retirees in America due to the incredible cost of medication and procedures. But at 499 a month, the average health care expenditure for a retiree is digestible given all the horror stories we hear about $100,000 knee replacements and $250,00 heart surgeries.
While a financial assist from an employer may no longer exist, at least there’s Medicare to help cover some costs. In other words, the healthcare social safety net does seem to be working. We should all still do as much as possible to eat right and exercise every day.
Average Expenditure On Entertainment: $197
What's the point of retiring if you aren't entertained. Spending $197 on entertainment is a decent amount since I see my in-laws and parents just watch sports on TV and YouTube all day.
In comparison, older households spend about as much on fun stuff as do those ages 25 to 34, but somewhat less than the broader average ($243 a month).
The Best Way To Plan For Retirement
As you can see from the article, the average retiree expenditure on housing, food, clothing, shelter, and health care is actually quite robust. The key for the average retiree is to make sure their wealth lasts.
Given there is no rewind button in life, it's best to stay on top of your finances like a hawk and know where all your money is going and being invested.
Sign up for Personal Capital, the web’s #1 free wealth management tool to track your wealth. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Your goal is to simply generate more in expected retirement cash flow than your realistic desired expenditure. See an example below.
A good rule-of-thumb is that in retirement you’ll need to replace about 70% of your income to maintain your standard of living. Hopefully you have saved aggressively, built retirement income streams, and can collect Social Security to help you out.
Nobody cares more about your money than you. Best you stay on top of your finances!
I’ve been using Empower since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
Best Way To Build More Retirement Income
Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile.
The combination of rising rents and rising real estate prices builds tremendous wealth over the long term. Meanwhile, there are more ways to invest in areas of the country where valuations are lower and net rental yields are higher thanks to crowdfunding.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. The real estate platform has over 300,000 investors and manages over $3 billion.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I've personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
About the Author:
Sam worked in investing banking for 13 years at GS and CS. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income.
He spends most of his time playing tennis and taking care of his family. Financial Samurai was started in 2009 and is one of the most trusted personal finance sites on the web with over 1.5 million pageviews a month. Sam is the bestselling author of Buy This, Not That: How To Spend Your Way To Wealth And Freedom.