A retirement budget starts with what you spend today. Take out the costs that end with work, add the ones retirement brings, and map how spending shifts as you age. That estimate of your retirement expenses drives most other numbers in your plan. It shapes how much you need saved and when you can stop working.
First guesses tend to run low. In the 2026 Retirement Confidence Survey from EBRI and Greenwald Research, 41% of retirees said their costs ran higher than they expected. Building the estimate now gives you time to adjust while you’re still earning.
How Much Do Retirees Spend a Year?
Households led by someone 65 or older spent an average of $61,432 in 2024, according to the Bureau of Labor Statistics. That’s about $5,100 a month. Spending drops with age. Households ages 55 to 64 spent about $85,000, and those 75 and older spent about $56,000.
Average Annual Spending by Age, 2024
| Age of householder | Total spending | Housing | Transportation | Health care |
|---|---|---|---|---|
| 55 to 64 | $84,946 | $27,019 | $15,085 | $6,711 |
| 65 to 74 | $65,354 | $22,329 | $11,414 | $7,715 |
| 75 and older | $55,834 | $21,999 | $6,855 | $7,918 |
Source: Bureau of Labor Statistics, Consumer Expenditure Surveys, table by age of reference person, 2024 data released December 2025.
These figures compare different households at different ages. They don’t follow one household as it gets older, and averages blend big spenders with frugal ones. Whether you’ll spend more or less once you retire depends on how you live now and what you plan to do next.
Wealthier households spend more. Most millionaire retirees spend $70,000 to $120,000 a year, according to J.P. Morgan research and Boldin’s own planning data.
Can You Estimate Retirement Expenses as a Percentage of Income?
You can, but a percentage of your income is a rough start. A common rule of thumb says you’ll need 70% to 80% of your preretirement income. It assumes your spending tracks your pay, and for many households it doesn’t.
Picture two couples who each earn $150,000. One saves 25% of its income and owns its home outright. The other saves 5% and carries a mortgage into retirement. The same percentage can’t fit both. Retirees in a 2014 T. Rowe Price survey lived on about 66% of their work income. Others spend more than they earned during their first years of travel.
Starting from your own spending gives you a number you can test.
How Do You Estimate Your Retirement Expenses?
You estimate retirement expenses by starting with your current spending and adjusting it for the changes retirement brings. Six steps cover it:
- Track a full year of spending.
- Subtract the costs that end when work does.
- Add the costs that start or grow in retirement.
- Split must-spend from like-to-spend.
- List big one-time expenses.
- Map spending to the phases of retirement.
Track a Full Year of Spending
Pull 12 months of bank and credit card statements. A full year catches the bills that come once or twice, like insurance premiums, property taxes, and holiday travel. A single month misses them.
Sort what you find into broad categories first, and add detail later. Category tracking is one of the simplest ways to budget, and separating fixed costs from variable ones helps. The infrequent but expected expenses are the ones most budgets miss.
Subtract the Costs That End When Work Does
Some of today’s spending stops with your last paycheck. Retirement contributions end. So does the 7.65% of wages employees pay in Social Security and Medicare taxes. Commuting, work clothes, and lunches out tend to shrink too.
Check your debts. If your mortgage ends before or soon after you retire, your housing cost drops by that payment. Paying off debt before you retire lowers the income your savings have to replace.
Add the Costs That Start or Grow in Retirement
Other costs show up or climb once you stop working. Health insurance is the big one if you retire before Medicare starts at 65. Unsubsidized health insurance at 62 can top $1,000 a month.
Free time costs money too. Travel, hobbies, and dining out often rise in the first years. Home repairs, car replacement, and help for family members are among the retirement costs people overlook most often.
Split Must-Spend From Like-to-Spend
Must-spend covers what you can’t cut: housing, utilities, food, insurance, and health care. Like-to-spend covers travel, dining out, gifts, and hobbies you’d keep if you could.
The split shows your spending floor. Many retirees cover must-spend with steady income like Social Security, a pension, or an annuity, and let the portfolio pay for the rest. That’s the idea behind an income floor strategy. It also gives you room to adjust. In a bad market year, you can trim like-to-spend and give your investments time to recover. A bucket strategy keeps a year or two of spending in cash for those stretches.
List Big One-Time Expenses
Some costs don’t fit a monthly budget. A new roof, a replacement car, a child’s wedding, or a milestone trip can each run into five figures. List the ones you expect, with a rough year and cost for each.
Leave room for the costs you can’t predict. A cash reserve covers surprises without forcing you to sell investments at a bad time. Some sources of emergency money cost far more than others.
Map Spending to the Phases of Retirement
Spending doesn’t stay flat for 30 years in most households. Planners often describe three phases: go-go years with more travel, slow-go years as activity eases, and no-go years centered on home and health care.
Real, inflation-adjusted spending tends to fall through retirees’ 60s and 70s, according to research by David Blanchett. Health care runs the other way and climbs with age. A retirement spending plan built on these phases tracks closer to real life than one flat number.
The BLS data shows a similar pattern across age groups. Households 75 and older spent about 15% less than those 65 to 74, and their health care spending ticked up.
What Are the Biggest Expenses in Retirement?
Housing, transportation, and health care are the biggest expenses in retirement. Together they made up 64% of spending for households 65 and older in 2024, based on BLS data. Housing took 36.1%, transportation 15.5%, and health care 12.7%.
Housing is the line you have the most control over. Paying off a mortgage, downsizing, or tapping home equity can each reshape your budget. Property taxes, insurance, and maintenance keep coming after the mortgage is gone.
Transportation is the second-biggest cost in retirement, ahead of health care for households 65 and older. It covers insurance, fuel, repairs, and replacing a car, and it falls as people drive less. Households 75 and older spent 40% less on it than those 65 to 74. When it’s time for a new car, buying used instead of new can save thousands.
Health care takes a larger share of the budget with age. Fidelity’s 2026 estimate puts lifetime retirement health care costs at $185,500 for a 65-year-old. Doubling it gives about $371,000 for a couple. Medicare has costs of its own. The standard Part B premium is $202.90 a month in 2026, according to CMS, and higher earners pay IRMAA surcharges on top.
Fidelity’s estimate leaves out long-term care. Someone turning 65 has almost a 70% chance of needing some type of long-term care, according to the Administration for Community Living. Starting a long-term care plan before you need it leaves more ways to pay.
How Do Inflation and Taxes Change Your Retirement Budget?
Inflation and taxes raise the amount you’ll need in future dollars. A budget built in today’s dollars needs both added in.
At 3% inflation, prices double in about 24 years. A $70,000 budget at 65 would cost about $142,000 at 89 for the same lifestyle. Social Security gets a yearly raise tied to the CPI-W, a price index built around workers’ spending. The 2027 cost-of-living adjustment is 3.6%, the Social Security Administration announced. Most pensions and portfolio withdrawals don’t adjust on their own. Your personal inflation rate can run higher if health care and housing take a bigger share of your budget.
Taxes are a retirement expense too. Withdrawals from traditional 401(k)s and IRAs count as income, and up to 85% of Social Security benefits can be taxable. Covering $70,000 of spending can take more than $70,000 in withdrawals, depending on your accounts and your state. Retirement taxes belong in the budget as their own line.
What Goes in a Retirement Budget?
A complete retirement budget covers these categories. Some costs could fit in more than one, so pick a home for each and stay consistent.
- Housing: mortgage or rent, property tax, homeowners insurance, HOA fees, and maintenance
- Utilities: electricity, gas, water, phone, and internet
- Food: groceries and dining out
- Transportation: car payments, auto insurance, fuel, repairs, and rideshares
- Health care: premiums, deductibles, prescriptions, dental, vision, and hearing
- Insurance: life, umbrella, and long-term care coverage
- Taxes: federal, state, and local income taxes
- Travel and recreation: trips, hobbies, and memberships
- Family and giving: gifts, help for children or parents, and charity
- Personal: clothing, personal care, and subscriptions
- Debt payments: credit cards, car loans, and any other balances
Many people start with a retirement budget worksheet and move to planning software once they want to test changes over time.
If your estimate comes in higher than your income, start with the largest lines. Housing, transportation, and health care move the total most. Smaller ways to cut retirement costs, like shopping for insurance or trimming phone and media bills, add up from there.
How Do You Know If Your Retirement Budget Will Work?
Your retirement budget works if income and savings cover it every year, in good markets and bad, for life. Testing it means projecting decades of income, taxes, and market swings.
The Boldin Planner projects your spending, income, and savings year by year. Its Budgeter lets you enter expenses and set different amounts for different phases of retirement. One-Time Expenses cover big purchases like a roof or a car. The Planner also models long-term care costs late in life by default, a line many budgets skip.
PlannerPlus adds the Detailed Budgeter, with separate Must Spend and Like to Spend budgets you can toggle between. Its Medicare Estimator prices coverage by plan type and health status, using state averages. You can build up to nine scenarios beside your baseline, then compare up to three side by side. Try a bigger travel budget in your 60s or a later mortgage payoff, and see what changes.
Your first estimate will miss in places. Revisit it each year with real numbers, and each pass gets you closer. A tested number also makes it easier to spend your retirement savings with confidence.
Retirement Budget FAQs
How much does the average retiree spend per month?
The average household headed by someone 65 or older spends about $5,100 a month, based on 2024 Bureau of Labor Statistics data. For households 75 and older, the figure drops to about $4,650. Those averages mix very different households, so your own spending history gives a more useful starting point for a budget.
Do expenses go down in retirement?
Retirement expenses fall for many households as payroll taxes, commuting, and retirement contributions end, and a paid-off mortgage can cut housing costs further. Early retirement can bring higher spending on travel and health insurance. Inflation-adjusted spending then tends to ease through the 70s, while health care costs keep climbing with age.
How far ahead of retirement do you need a budget?
A retirement budget is most useful five to 10 years before you stop working. That leaves time to pay down debt, raise savings, and test different retirement dates. Tracking a full year of spending first gives the estimate a solid base. Revisiting it each year keeps the numbers current as your plans and prices change.
What is the 80% rule for retirement?
The 80% rule is a rule of thumb that says retirees need about 80% of their preretirement income to keep their lifestyle. It’s a rough starting point. Someone who saved a large share of pay may need far less. Someone with a mortgage, big travel plans, or early health insurance costs may need more.
Do you need to include taxes in a retirement budget?
Taxes belong in a retirement budget because much of retirement income is taxable. Traditional 401(k) and IRA withdrawals count as ordinary income, and up to 85% of Social Security can be taxed. Qualified Roth withdrawals and HSA money spent on medical costs are tax-free, so your account mix changes how much tax to plan for.
How much do retirees spend on health care?
Fidelity estimates that a 65-year-old retiring in 2026 will spend $185,500 on health care over retirement, not counting long-term care. On a yearly basis, households 65 and older spent $7,799 on health care in 2024, according to the Bureau of Labor Statistics. Health, coverage choices, and location all move the number.
What is the biggest expense in retirement?
Housing is the biggest expense in retirement for most households. Households 65 to 74 spent $22,329 on housing in 2024, according to the Bureau of Labor Statistics. Those 75 and older spent $21,999. Housing costs hold steady with age while other spending drops, so housing takes a growing share of the budget.
