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Biggest Expenses in Retirement

Each week I sit down with our financial planners to review plan drafts prior to the client seeing them. Each week I hear the same set of advisor concerns that the client is in good shape based on our income assumptions but, the client is not sure exactly what their expenses will be in retirement. This creates the question, what are the biggest expenses in retirement and what can a retiree do about it?

In a 2021 study by the Employee Benefit Research Group they outlined where most of retiree funds are going and also noted that spending does change through retirement.

In the study, for those just starting out in retirement, 44% of their expenses are related to housing, 15% transportation, 10% entertainment, 9% healthcare, 6% gifts and other, and 4% clothing. This shifts over time as seen in the chart below.

Spending declines and evolves over time

In our retirement planning process, we work hard to find a path for retirees to enter retirement debt free. Why is this so important? By not having a home or car payment, we are freeing up nearly 55% of the households cashflow. This free cashflow can be used in more fun ways, like entertainment, traveling, meals or helping others. For some it takes some dedication to get to be debt free and for others it is simply moving funds around to take a more conservative approach in retirement. Regardless of how you get there, it is very important.

When trying to determine you retirement expenses, look through the last three months of your credit card and bank statements. Use the budget worksheet link and enter in the items that you think will still be there in retirement. For many, they find retirement to be cheaper than working!

Download our printable budget worksheet.

Casey Smith


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Wiser Wealth Management, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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