Best Retirement Calculators

 

 

 

 
Best Retirement Calculators
  Home Page
  Retirement Calculators
  Retirement Calculator Evaluation
  Longevity Calculators
  Social Security
  Retirement Expenses
  Inflation
 Retirement Videos
  Retirement Resources
  Site Search
  Disclosure Policy
  Privacy Policy
  About Me
  Contact

Retirement Living Expenses

Hopefully, our retirement living expenses will be significantly less than our pre-retirement living expenses.

When we retire, we stop saving for retirement.  We will not pay taxes or if we do pay taxes, they will be much lower than before retirement.  Hopefully, we will have our mortgage and other debts paid so we will not be paying our mortgage payment or interest on other debts in retirement.

We need some data as the basis to project our retirement living expenses.

Bureau of Labor Statistics Logo

In the United States, the U. S. Government is the best source for this information.  The United States Department of Labor - Bureau of Labor Statistics (BLS) compiles a consumer expenditures survey each year.  The information is released each October for the previous calendar year.  The website for this information is http://www.bls.gov/cex/home.htm

Since we are assuming that we are trying to find statistics for a retired couple, the best information I found is in the table “Composition of consumer unit”.  For 2011, this can be read in text at

ftp://ftp.bls.gov/pub/special.requests/ce/standard/2011/cucomp.txt

 or in PDF format at

http://www.bls.gov/cex/2011/Standard/cucomp.pdf.

In Table 5, Composition of consumer unit, there is a column “Husband and wife only”.  This is the column to use for your information.

Here is what we know about this average husband and wife unit:

  • There are 25,270,000 units like this in the US.
  • The average income before tax for the couple is $78,823.
  • The after tax income is $75,607.
  • The age of the reference person is 58.1 years.

Here is the information for the husband and wife unit over the last few years:

Item 2008 2009 2010 2011
Number in consumer unit (in thousands)     26,919     26,852     25,723    25,270
         
Income before taxes  $ 75,312  $ 75,876  $  76,543  $78,823
Income after taxes  $ 72,457  $ 72,316  $  73,835  $75,607
Age of reference person 57.6 57.7 58.0 58.1
Persons in consumer unit 2.0 2.0 2.0 2.0
Persons 65 and older 0.7 0.7 0.7 0.7
Earners 1.2 1.2 1.2 1.2
Vehicles 2.4 2.5 2.4 2.6

This seems like a good reference since they do not have any children to take care of and they are relatively close to retirement age.  Notice that 0.7 individuals are 65 or over.  Their life style and living costs should approximate a couple starting retirement.

Your income and spending habits may not exactly match our reference couple, but your expenses as a percent of your income will probably be close to the percentages of the reference couple.

The percentages are what we will used for comparison.

The table on the BLS website is not easy to read since it lists the total for a category first followed by the detail.  I have extracted the column for the husband and wife unit and made some format changes to make it easier to read.

All total lines are bold.

If a total covers several detailed level items and/or subtotal items, the item is highlighted in yellow.

The table shows the percent of income of each expense.

I added two additional columns, Basic Costs and Discretionary Costs.  These classifications are debatable so feel free to change the classification as you please.  My wife did not consider footware a discretionary cost.  It is a necessity of living (LOL).

I have created an Excel Retirement Living Expenses Calculator using the data in the Consumer Expenditure Survey.  You you can download and use it for your retirement expenses calculations at the above link.

Here is the Consumer Expenditures Survey for your use.  You can download this table in Excel format and modify it for your own life style.

Average annual expenditures - 2011 Husband and wife only Percent of Income Basic Costs Discretionary Costs Comments
           
Food............................................. 6,895 8.75%      
           
Food at home.................................... 3,935 4.99% 3,935    
Cereals and bakery products.................... 535        
Cereals and cereal products................... 168        
Bakery products............................... 367        
           
Meats, poultry, fish, and eggs................. 820        
Beef.......................................... 225        
Pork.......................................... 162        
Other meats................................... 116        
Poultry....................................... 137        
Fish and seafood.............................. 132        
Eggs.......................................... 48        
           
Dairy products................................. 420        
Fresh milk and cream.......................... 140        
Other dairy products.......................... 279        
           
Fruits and vegetables.......................... 761        
Fresh fruits.................................. 272        
Fresh vegetables.............................. 255        
Processed fruits.............................. 108        
Processed vegetables.......................... 126        
           
Other food at home............................. 1,400        
Sugar and other sweets........................ 152        
Fats and oils................................. 119        
Miscellaneous foods........................... 687        
Nonalcoholic beverages........................ 361        
Food prepared by consumer unit on out-of-town          
trips........................................ 81        
           
Food away from home............................. 2,960 3.76%   2,960  
           
Alcoholic beverages.............................. 610 0.77%   610  
           
Housing.......................................... 18,329 23.25%      
           
Shelter......................................... 10,404 13.20%      
           
Owned dwellings................................ 7,622 9.67%      
Mortgage interest and charges................. 3,341       No mortgage
Property taxes................................ 2,558   2,558    
Maintenance, repairs, insurance, other          
expenses..................................... 1,724   1,724    
           
Rented dwellings............................... 1,471 1.87%     Own home
           
Other lodging.................................. 1,312 1.66%      
           
Utilities, fuels, and public services........... 4,073 5.17%      
Natural gas.................................... 452        
Electricity.................................... 1,563   1,563   Use all electric
Fuel oil and other fuels....................... 212        
Telephone services............................. 1,275   1,275    
Water and other public services................ 571   571    
           
Household operations............................ 1,021 1.30% 1,021    
Personal services.............................. 69        
Other household expenses....................... 952        
           
Housekeeping supplies........................... 800 1.01% 800    
Laundry and cleaning supplies.................. 172        
Other household products....................... 439        
Postage and stationery......................... 189        
           
Household furnishings and equipment............. 2,029 2.57%   2,029  
Household textiles............................. 144        
Furniture...................................... 437        
Floor coverings................................ 37        
Major appliances............................... 275        
Small appliances, miscellaneous housewares..... 138        
Miscellaneous household equipment.............. 999        
           
Apparel and services............................. 1,715 2.18%      
           
Men and boys.................................... 363 0.46%   363  
Men, 16 and over............................... 338        
Boys, 2 to 15.................................. 25        
           
Women and girls................................. 737 0.94%   737  
Women, 16 and over............................. 691        
Girls, 2 to 15................................. 47        
           
Children under 2................................ 30 0.04%   30 Grandchildren?
           
Footwear........................................ 297 0.38%   297  
           
Other apparel products and services............. 288 0.37%   288  
           
Transportation................................... 9,474 12.02%      
Vehicle purchases (net outlay).................. 2,793        
Cars and trucks, new........................... 1,557        
Cars and trucks, used.......................... 1,158   1,158    
Other vehicles................................. 77        
           
Gasoline and motor oil.......................... 2,923 3.71% 2,923    
           
Other vehicle expenses.......................... 3,056 3.88%      
Vehicle finance charges........................ 248        
Maintenance and repairs........................ 981   981    
Vehicle insurance.............................. 1,244   1,244    
Vehicle rental, leases, licenses, and other          
charges....................................... 583     583  
           
Public and other transportation................. 702 0.89% 702    
           
Health care...................................... 5,127 6.50% 5,127    
Health insurance................................ 3,004        
Medical services................................ 1,089        
Drugs........................................... 829        
Medical supplies................................ 205        
           
Entertainment.................................... 3,286 4.17%   3,286  
Fees and admissions............................. 719        
Audio and visual equipment and services......... 1,071        
Pets, toys, hobbies, and playground equipment... 809        
Other entertainment supplies, equipment, and          
services....................................... 687        
           
Personal care products and services.............. 761 0.97% 761    
           
Reading.......................................... 177 0.22% 177    
           
Education........................................ 716 0.91% 716    
           
Tobacco products and smoking supplies............ 293 0.37%   293  
           
Miscellaneous.................................... 902 1.14% 902    
           
Cash contributions............................... 2,824 3.58% 2,824    
           
Personal insurance and pensions.................. 6,549 8.31%      
Life and other personal insurance............... 473        
Pensions and Social Security.................... 6,077        
           
*** Total Expenses *** $57,658 73.15% 30,962 11,476  
      39.28% 14.56%  

You can see that according to these numbers, a couple's basic retirement living expenses are 39.28 percent of income and the discretionary expenses are 14.56 percent.  The total living expenses are 53.84 percent of income.

Many financial planners say that we need 75 percent or more of our pre-retirement income to live on during retirement.  This 53.84 percent is significantly less than that.

A logical analysis supports this 53.84 percent versus the 75 percent.  When you consider that during our working lives, we have been paying off a mortgage, paying to raise children, supporting multiple vehicles, sending children to college, saving for retirement, etc., we have not had 75% to spend on ourselves.  Why do we suddenly need 75% at retirement?

One other thought to consider is some of the retirement living expenses that are included in the itemized living expenses will actually be lower after retirement.  These include clothing, cleaning bills for work clothes, fuel costs for commuting, parking fees at work, business gifts, etc.  These are not taken out of any of the costs.

Health insurance may also be reduced when both members of the couple go on Medicare at 65.  However, Medicare premiums are projected to rise in the future so plan for increased health care costs in the long term.

When you work through these expenses and decide what your real retirement living expenses will be, you can then enter this information into the best retirement calculators.

Use the Retirement Living Expenses Calculator on this website

Here are other Retirement Living Expenses worksheets or calculators to consider:

Finished Retirement Living Expenses - Go back to home page.



Home Page

John Howe, Inc.  - Copyright 2013

free hit counter code