How Spending Changes in Retirement

We were speaking of retirement earlier this week and when I ran across a news item I had saved, I decided why not go whole hog in one week on this topic.

According to a study by the Employee Research Benefit Institute (EBRI), overall spending drops on average by about 20 percent after retirement from a median of $39,945 annually in working households to $31,365 in retirement households.

EBRI found the only major expense that increases after retirement is healthcare. In the working, 50-64 age group, health expenses account for about 9 percent of income. After age 85, it has doubled which, of course, makes sense.

Here are the EBRI survey results and how I stack up with them in the other five major expense categories:

HOUSING is the single largest expense for people of all ages, says EBRI.

”Home-related expenses represent 47 percent of all costs for people ages 50 to 64, which declines to 44 percent between ages 65 and 74.”

I've never spent that much. With a mortgage, homeowners insurance and property taxes, I was spending about 25 percent of income on housing before I retired. I have no mortgage now but counting homeowners association dues, ever-increasing property taxes and insurance but much lower income, I spend about the same 25 percent on housing.

TRANSPORTATION costs drop dramatically in retirement especially without a commute – from 14 percent of income for 50-64 year olds to a low of 8 percent for those 85 and older. Couples often can get by with one car in retirement rather than two.

I hardly notice auto costs. Especially during winter when I don't stray far from my town, I fill up the car with gas about once every six weeks. With insurance and registration, I spend about four percent of income on auto-related expenses.

EBRI says the amount spent on FOOD AND CLOTHING doesn't change much in retirement – 12 percent and 3 percent respectively. I know that with dry cleaning and my shoe fetish I spent a lot more than 3 percent on clothes when I was working. Nowadays, 3 percent or less sounds about right.

Food, however, is where I indulge myself. I eat out about twice a week and cook all my other meals. In the past eight or ten years, my grocery costs have been down because I hardly ever eat meat, but fresh vegetables and fruit prices have skyrocketed just in the past two or three years. It evens out, maybe, with the fact that varieties of good fish can be found frequently for only four or five dollars a pound.

I don't know the percent of my income food and clothing account for, but I don't feel constrained in spending for what I need and I don't feel deprived of either.

Without giving a percentage, the EBRI study says that GIFTS AND DONATIONS increase a great deal with age – for indulging grandchildren and because people “may decide as they age that they don't need all that money.”

It's hard to believe that the $31,365 average income of retired households is “all that money” to anyone. During my last few years of employment when I was trying to pay off some high medical bills and then the interim years following when I was scrimping by until eligible for full Social Security, donations were out of the question.

Well, if you don't count the no-kill pet shelter for which I squeezed out money. Now, I can better do my part although I often wish I had more to give.

The EBRI study reports that the amount of money spent on ENTERTAINMENT stays the same in the first few years of retirement and then declines with further aging. It starts out, they report, at about 9 percent of income.

I think it all depends on what you count as entertainment.

”How retirees choose to fill their new-found hours of leisure time can make a big difference in their retirement security. 'They can either spend this time on activities around the house that reduce overall spending, such as doing more home repairs yourself, preparing more meals at home, doing your own cleaning rather than getting someone else to do the cleaning, and going out and looking for deals and smart spending opportunities, or they could spend this time traveling or entertaining - and that takes money,' says Rohwedder. 'It very much depends on what people do with their newly gained time.'"

Cooking at home, house cleaning and DIY projects may or may not fall into a given person's idea of entertainment. In my case, “going out and looking for deals and smart spending opportunities” is a fairly close definition of hell. Aside from food, I despise shopping.

Some of us have a wider definition of entertainment that these survey folks: books, magazines, movies, television, blogging, classes, volunteering, gardening, etc. Some of these cost money, some don't. I suspect entertainment costs vary widely depending on definition and from person to person.

So I wonder how spending has changed for you in retirement. And if you are not retired, how you expect it to change. You can read the full EBRI report here [pdf] or a shorter overview from U.S. News here.

ADMINISTRIVIA: Some readers who have emailed a message or information to me may be waiting for a response. Thanks to a vicious spam blocking service called Spamcop, my responses are sometimes returned to me because your ISP uses this service to try to keep spam to a minimum.

It doesn't matter that I don't send spam. If too many others on the same email service I use are spamming, everyone is blocked (forever or shorter, but no way to know which) and the “service” pretty well refuses to remove anyone unfairly blocked.

So if you've been expecting an answer from me and have not received it after three or four days, I've probably received a refusal to deliver from Spamcop. Sorry, but I do not have the patience to try to undo this – reports all over the web say it's nearly impossible, as does my email provider.

At The Elder Storytelling Place today, Lia Hirtz: To Belong


I can't give you percentages, but I'm absolutely certain spending in retirement (13 years ago)is way down for us. And yes the outstanding expense is supplemental health insurance & property taxes. I sense that my neighbors in this condo community would agree with me. If I could, I would spend more on traveling especially to see adult children who live far away, but health issues preclude that so perhaps that's why I'm generous with $$ gifts for holidays & special occasions. Two cars as well is an additional expense, but I see one car in the very near future. Being in a newly built condo keeps us from the expense of renovations & that really reduces my stress. However, dental care & groceries are so high that like you, I've found ways to minimize the cost of groceries without much impact on healthy eating. Dee

Housing: Apartment same.
Medical: Medicare, Blue Cross.
Car: $20/month.
Food: Cook meals.
Insurance: Same.
Clothing: Sweat suits, shorts.
Shopping: Broken, replace.
Charity: Selective.
Entertainment: Writing, reading, classical music, Netflix.

My entertainment costs are far more; I subscribe yearly to the Orpheum traveling Broadway play series, our local professional drama series, the community theater, the municipal art museum, and the Botanic Garden. I sometimes attend the symphony, go to the movies often, and take at least one major trip a year. At 71 I don't see this changing unless my health does. I still have a mortgage, but $1000 a month includes all insurance and taxes (we have the highest real estate taxes in TN). I love plants and spend a lot each year on the garden.

At age 45, I re-entered the work place after 9 yr hiatus and virtually no retirement (that was lost in a divorce). Only for the last 6 yrs have I made more than $27K; even that is considered good pay for university staff. I've scrimped and saved so that, hopefully, when I have more time to enjoy life, I will have a few more dollars available. The first few years of retirement, from age 60-66, will be my lean years before Soc Sec kicks in.

I love gardening, fiber activities (knitting and spinning now; might take up weaving in retirement), and reading. Would travel a little in retirement if I can afford it. Plan to take classes for fun, craft-related or maybe some academic studies....again, depending on how far I can stretch my $.

One thing I find frustrating as I plan for retirement is not being able to accurately predict my net monthly pension, mainly the vagaries of taxes and health insurance costs.

My expenses are fairly well limited to food, house repair (including improvements)and utilities, and health care. My entertainment expense is low and Net Flix is my only monthly expense in that category. I can't give you percentages of each, but I think food is the largest item in my budget.

I have a monthly home association dues and have to pay for my own roof coating every 3 or 4 years and I think housing accounts for 1/3 of my income.

Health issues mean that my travel is now very limited and I may not take another trip. It is increasingly hard and this is the thing I hate giving up the most.

I try to give generously to my children and grandchildren on their birthdays and at Christmas. There is little left over for charities.

Our income is around 29,000.00 for two and it is really tight. Our mortgage is small and tasxes reasonable, but gas, electricity and water are high. Our healthy pets are out main entertainment but even they have bad vacine reactions or rip a dew claw and the cost is huge. We have cut out all comfort/fun food and soon will have to get rid of internet and cable. Sounds dismal but we are pretty healthy and happy. And know many others have far less.

Bad decisions have me at the beginning of a new but very low interest mortgage (can't believe the rates these days) which I doubt I'll live long enough to pay off. With repairs and maintenance, it's more than rent, but I enjoy the privacy, single story, attached garage, etc., and of course, a monthly payment that won't go up every year.

My 17-year-old car died last year, so I now have car payments. But I'd assumed I'd need at least one more in my lifetime. At 3,000 miles a year on average, this one should last.

Entertainment is anything that comes via basic cable and the Internet. Blogging, gaming, favorite shows, etc. I shop for everything online (hate shopping at brick-and-mortar stores). Clothing expense is minimal as I can only wear one set of sweats or other comfy/casual clothing at a time.

So far health expenses have been relatively low (knock wood), but as we all know, that could change tomorrow.

I rarely eat out (expensive and no fun alone). Occasionally (once or twice a month) I grab fast food or order pizza. Travel is minimal. Plans to sightsee all over the state (Colo.) and the Rocky Mountain region have fallen by the wayside due partly to sciatica that can flare up unexpectedly. Room and board on the road aren't cheap either. Also, I have pets that must be boarded ($$$). (And btw, have you checked out veterinary costs lately!?)

I'm confortable but careful, and if necessary would try to reduce across the board rather than completely eliminate any of the above expenses.

Wow, are you right about veterinary expenses these days. I can't walk in the vet's door for under $100 and everything from there just adds on.

I can certainly attest to the high cost of veterinary care these days! One of our much-loved 10 Y/O cats had to have abdominal surgery a couple of weeks ago for an intestinal obstruction, his second in 5 years. He had to have a pre-surgical ultrasound and stayed in the "Cat ICU" overnight. All I can say is WOW!!! (Or maybe "Ow" would more accurately describe it.) But it had to be done, so there it is.

Otherwise, our expenses are definitely lower in most areas than when we were working (I still work part time and commute once a week). We recently refinanced our townhouse to take advantage of lower interest rates, which lowered our monthly payments as well.

We're fortunate to have excellent retiree healthcare coverage through a large HMO (although I worry every year that we'll get a letter cancelling our plan!). We don't travel, and our entertainment is home-based. We probably spend more on food than we need to, but neither of us likes to cook. We don't eat out much, but we do buy good quality pre-prepared food and fresh produce. I'd like to be able to give more to charity, especially the no-kill cat shelter where I volunteer.

Leisure time means just that to me - LEISURE. I don't want to have to travel too far for entertainment and I want to avoid large crowds. There are venues that can accommodate this, especially in communities away from large metropolitan areas.

I married an electrician whose brother has an air-conditioning company and whose son is a veterinarian! Needless to say, these connections come in handy, especially during the past few years of jobs few and far between! Dave barters his electrical services for great seafood from a distributor-friend and sometimes for other things, like a home inspection from our son-in-law.

Medical costs have gone down since Medicare kicked in. I took SS at 63 when I retired and don't regret doing so. Mine is fairly small and the increase was not worth waiting for when we needed the money during the recession. Spend money on travel and helping out my kids who are still in school/university.

I am thinking that those who put that much emphasis on their pets might want to invest in pet insurance. It's an expense, but certainly could pay for itself for people who will do anything for their pets - like we do.

As for insurance, if a person has a retiree policy and is on Medicare, and that retiree policy goes away, there are protections - check them out, it may ease your mind a bit. You can call a SHIP counselor for your state - contacts can be found on the Medicare site.

I have not retired yet - although I think about it a lot. I know if I retired that I would spend less on clothing and less on food, but more on travel and "fun." Housing would stay the same - property taxes, no mortgage. I think part of my recreation would be "creative shopping."

My housing expenses (except for property taxes) have gone way down now that I live in a condo. As for clothes, I've been waiting to get back down to a size 8 again for the last 10 years and I don't intend to invest in clothes until I've reached that plateau. That means, of course, that clothes are not a big item in my budget now, nor are they likely to be in the future. Food's gone up and since I live in a sprawling metro area, I probably spend more on gasoline than I used to in spite of not working anymore due to higher gasoline prices.

My dog is young and healthy, but just the annual vaccinations and teeth cleaning are a big chunk. I have about $100 of meds/month, but otherwise medical expenses are minimal. I find that I can add to my savings if I am careful.

I'm a bit of an anomaly--a divorce many years ago left me in near-poverty from age 42 to age 76. I learned to cope and had a wonderful enriched life regardless. However, when he died 3 years ago, my extremely low s.s. payments tripled, and even though it's not a lot by other people's standards, I have felt wealthy by comparison to all of those penny-pinching years.I lost some of the perks of being poor but was able to stay in subsidized senior housing--- just paying 3 times the rent.I really understand now how hard it is for young people, especially single moms, on government assistance to ever get ahead--one hand gives and the other hand takes it all back!

Reply to Nan about pet insurance: I would insure both of our cats if I could. One is insured--we got her from friends as a kitten, along with her medical records. Our other kitty is a stray that we adopted after finding him one chilly morning trying to sleep on our front door mat cold, damp and hungry. All we had was an estimated age when we took him to our vet--no medical info at all. The premiums would have been very high, probably more than the annual maximum payout. So we elected to "go bare" with him. I agree that if a pet is insurable, it's well worth considering. It helps significantly with major medical expenses.

Thanks, too, for the tip on Medicare and loss of retiree coverage. I'll see what I can find out about our plan. . .just in case.

I don't think we spend much differently on a daily basis. I had always been frugal about things after growing up in a home without a lot of money. I always knew how to see things I liked might wish to have, but say no to myself even when I could have afforded more. Fancy restaurants or expensive travel has never been my thing.

We have however bought two big-ticket items this year. One is a new tractor for the farm to enable Farm Boss getting the work done with less hassle. He has kept his tractors working by elbow grease and ingenuity. I felt he deserved better. Then we just bought a vacation trailer which we had never owned the like. It ran about the cost of say one nice trip to Europe for the two of us, and it will enable us to spend time in places I at least would prefer to be. I worried though about that expense-- like oh my gosh what was I think? Well one thing I am thinking besides it lets us stay where we want-- we can take cats with us when we need to do it.

I don't know how relevant my post will be, as an Englishwomen living in Spain. I do think I/we're better off here that in the UK. Some essentials like food, clothes, property tax and petrol are cheaper. Electricity and internet are not - almost double what we are used to. So it's swings and roundabouts.

We have a small amount of disposable income which we use for books, gifts and beautifying the garden. We hardly ever eat out as I love cooking.

Happily, Spain has reciprocal arrangements with UK for health care, so ours is free, also prescriptions. I just cannot imagine how it is for you all in the US to experience the expense, worry and insecurity about your health plans.

Hadn't stopped to think about percentages of expenses in different categories ratio to total income, much less how they compare to national averages. Will have to take time to pull the figures together to compute this later.

Overall life is easier than for many years but not much less expensive as a single than when my husband was still living. I never lived excessively when I couldn't have everything I might want and still don't, but never felt deprived even if some might have experienced it differently.

I know all my expenses are within a reasonable range, but had a lot of expense needing to replace appliances that curiously started happening six months or so after my husband's death. I ate out a lot during that time. also expended a lot of time on entertainment for a few years. I eat at home now most of the time and haven't been engaged in as many entertainment activities, all by choice. I splurg on periodic fresh prepared dinners, lots of fish, chicken and fruit and veggies -- virtually no sweets.

Auto Expenses are quite minimal since even my part time work is only 3 - 8 miles from my home, plus haven't been making as many freeway trips in recent years, again by choice. Gee, I wonder if I'm slowing down some more, or maybe it's temporary.

Food expense probably absorbs any extra $$$ I might have once spent on clothing and shoes - the latter being quite traditional compared to what I used to wear.

Travel is considerably more modest than I would have expected, or what I would have done ten years ago, but likely this is a temporary phase since I am able to afford more.

Donations are modest, vary and might be to PBS, health-related research organizations, other.

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