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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 during retirement.

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

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 trying to find statistics that are representative of a retired couple, there are several different sources of information on the BLS site.

Initially, I used information in a BLS table titled “Composition of consumer unit”.  In this table, there is a column “Husband and wife only”.  This was the information I used for comparison of a retired couple for a few years.

As I learned more about all the data that is available on the BLS site, I found other information that is very helpful for retirees.  This is found in a table “Age of reference person” that shows information by various age brackets.  The brackets of interest to retirees are 55 – 64 years, 65 – 74 years, and 75 years and older.

Here is a summary table that compares each of these four groups:

Item Husband and
wife only
55-64
years
65-74
years
75 years
and older
Number of consumer units (in thousands) 26,456 22,887 16,024 12,018
Income before taxes $82,773 $74,182 $53,451 $34,097
Income after taxes 70,791 63,312 48,742 32,744
         
Age of reference person 58.6 59.2 68.8 81.6
         
Average number in consumer unit:        
People 2 2.1 1.9 1.6
Children under 18 NA .2 .1  
Adults 65 and older 0.7 .1 1.4 1.3
Earners 1.2 1.3 .7 .2

Here is what this summary tells us:

  • How many reporting units are in each group.
  • The average income before tax for the unit.
  • The average after tax income for each unit.
  • The average age of the reference person in the unit.
  • The number of people in each unit ranges from 1.6 to 2.1.

These groups seem like good references since they are close to or in retirement age.  If they have any children, they have very few under 18 years. Their life style and living costs should approximate a couple approaching or starting retirement in the younger age groups or in retirement for the older age groups.

You can find these tables at http://www.bls.gov/cex/tables.htm. You will find the two tables referenced above in the section named CURRENT COMBINED EXPENDITURE, SHARE, AND STANDARD ERROR TABLES.

The bad news is that these tables are very difficult to read and understand as published on the BLS website.

The good news is that I have changed the format of the tables to make them easier to read and published them on this site.

All total lines are bold.

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

The tables shows the percent of income of each expense.

Here is a combined table with the four different retirement groups so you can compare them in more detail.  Read through the table and find the group that you feel most closely matches your situation.  At the end of the table, we will take the next step.

Notice that the total expenses decline as the age increases.  This is a common finding from independent studies that are performed on retiree spending.

Item Married Couple % of Income 55-64
years
% of Income 65-74
years
% of Income 75 years
and older
% of Income
Number of consumer units (in thousands) 26,456   22,887   16,024   12,018  
                 
Consumer unit characteristics:                
                 
Income before taxes $82,773   $74,182   $53,451   $34,097  
Income after taxes 70,791   63,312   48,742   32,744  
                 
Age of reference person 58.6   59.2   68.8   81.6  
                 
Average number in consumer unit:                
People 2.0   2.1   1.9   1.6  
Children under 18 n.a.   .2   .1   a/  
Adults 65 and older .7   .1   1.4   1.3  
Earners 1.2   1.3   .7   .2  
Vehicles 2.3   2.2   1.9   1.3  
                 
Percent distribution:                
                 
Reference person:                
Men 57   50   50   39  
Women 43   50   50   61  
                 
Housing tenure:                
Homeowner 84   79   82   79  
With mortgage 41   43   32   12  
Without mortgage 43   36   50   67  
Renter 16   21   18   21  
                 
Race of reference person:                
Black or African-American 6   12   10   8  
White, Asian, and all other races 94   88   90   92  
                 
Hispanic or Latino origin of reference person:                
Hispanic or Latino 6   8   7   5  
Not Hispanic or Latino 94   92   93   95  
                 
Education of reference person:                
Elementary (1-8) 5   6   7   14  
High school (9-12) 28   29   35   39  
College 67   64   58   46  
Never attended and other a/   a/   a/   a/  
                 
At least one vehicle owned or leased 96   91   90   78  
                 
Average annual expenditures $61,246 73.99% $55,892 75.34% $46,757 87.48% $34,382 100.84%
                 
                 
Item Married Couple % of Income 55-64
years
% of Income 65-74
years
% of Income 75 years
and older
% of Income
                 
Food 7,150 8.64% 6,711 9.05% 6,020 11.26% 4,144 12.15%
                 
Food at home 4,168 5.04% 4,232 5.70% 3,728 6.97% 2,825 8.29%
                 
Cereals and bakery products 540 0.65% 573 0.77% 488 0.91% 418 1.23%
Cereals and cereal products 175   185   156   117  
Bakery products 365   388   332   302  
                 
Meats, poultry, fish, and eggs 901 1.09% 898 1.21% 809 1.51% 538 1.58%
Beef 239   243   215   128  
Pork 187   183   177   112  
Other meats 123   128   107   76  
Poultry 157   154   139   91  
Fish and seafood 132   131   113   85  
Eggs 63   58   58   45  
                 
Dairy products 441 0.53% 426 0.57% 380 0.71% 314 0.92%
Fresh milk and cream 149   148   132   109  
Other dairy products 293   278   248   204  
                 
Fruits and vegetables 828 1.00% 797 1.07% 730 1.37% 580 1.70%
Fresh fruits 297   279   270   222  
Fresh vegetables 276   256   237   168  
Processed fruits 117   122   108   95  
Processed vegetables 137   139   116   95  
                 
Other food at home 1,458 1.76% 1,538 2.07% 1,320 2.47% 975 2.86%
Sugar and other sweets 158   156   152   109  
Fats and oils 123   128   121   89  
Miscellaneous foods 719   780   631   516  
Nonalcoholic beverages 389   415   365   237  
Food prepared by consumer unit on out-of-town trips 69   60   52   24  
                 
Food away from home 2,982 3.60% 2,479 3.34% 2,292 4.29% 1,319 3.87%
                 
Alcoholic beverages 601 0.73% 465 0.63% 400 0.75% 232 0.68%
                 
Housing 19,184 23.18% 17,937 24.18% 15,639 29.26% 12,314 36.11%
                 
Shelter 10,956 13.24% 10,251 13.82% 8,410 15.73% 6,882 20.18%
                 
Owned dwellings 7,887 9.53% 7,265 9.79% 6,072 11.36% 4,234 12.42%
Mortgage interest and charges 3,344   3,295   2,225   673  
Property taxes 2,611   2,388   2,202   1,882  
Maintenance, repairs, insurance, other expenses 1,931   1,582   1,645   1,678  
                 
Rented dwellings 1,871 2.26% 1,937 2.61% 1,444 2.70% 2,292 6.72%
                 
Other lodging 1,198 1.45% 1,049 1.41% 894 1.67% 356 1.04%
                 
Utilities, fuels, and public services 4,127 4.99% 4,135 5.57% 3,824 7.15% 3,022 8.86%
Natural gas 440   437   442   371  
Electricity 1,546   1,568   1,445   1,225  
Fuel oil and other fuels 188   176   222   204  
Telephone services 1,375   1,377   1,145   772  
Residential phone service, VOIP, and phone cards 482   458   516   505  
Cellular phone service 893   918   629   267  
Water and other public services 578   577   571   451  
                 
Household operations 1,131 1.37% 1,034 1.39% 984 1.84% 1,037 3.04%
Personal services 73   107   80   234  
Other household expenses 1,058   927   904   803  
                 
Housekeeping supplies 814 0.98% 706 0.95% 803 1.50% 532 1.56%
Laundry and cleaning supplies 183   162   163   131  
Other household products 437   380   450   247  
Postage and stationery 194   164   190   154  
                 
Household furnishings and equipment 2,156 2.60% 1,811 2.44% 1,618 3.03% 841 2.47%
Household textiles 118   100   134   65  
Furniture 534   463   328   170  
Floor coverings 39   34   25   5  
Major appliances 286   250   223   128  
Small appliances, miscellaneous housewares 144   118   92   78  
Miscellaneous household equipment 1,034   846   815   395  
                 
Apparel and services 1,672 2.02% 1,563 2.11% 1,222 2.29% 768 2.25%
                 
Men and boys 362 0.44% 326 0.44% 235 0.44% 139 0.41%
Men, 16 and over 342   299   211   126  
Boys, 2 to 15 19   27   24   13  
                 
Women and girls 705 0.85% 679 0.92% 587 1.10% 428 1.26%
Women, 16 and over 662   615   542   410  
Girls, 2 to 15 42   64   45   18  
                 
Children under 2 36 0.04% 41 0.06% 35 0.07% 5 0.01%
                 
Footwear 294 0.36% 285 0.38% 173 0.32% 101 0.30%
                 
Other apparel products and services 276 0.33% 232 0.31% 193 0.36% 94 0.28%
                 
Transportation 10,896 13.16% 9,482 12.78% 7,972 14.91% 5,149 15.10%
                 
Vehicle purchases (net outlay) 4,056 4.90% 3,275 4.41% 2,396 4.48% 1,783 5.23%
Cars and trucks, new 2,371   1,614   1,557   1,040  
Cars and trucks, used 1,637   1,598   825   739  
Other vehicles 48   63   14   4  
                 
Gasoline and motor oil 2,928 3.54% 2,792 3.76% 2,233 4.18% 1,220 3.58%
                 
Other vehicle expenses 3,089 3.73% 2,824 3.81% 2,677 5.01% 1,805 5.29%
Vehicle finance charges 230   189   132   59  
Maintenance and repairs 1,012   960   916   505  
Vehicle insurance 1,186   1,153   984   986  
Vehicle rental, leases, licenses, and other charges 661   522   645   255  
                 
Public and other transportation 822 0.99% 591 0.80% 665 1.24% 341 1.00%
                 
Healthcare 5,477 6.62% 4,378 5.90% 5,188 9.71% 4,910 14.40%
Health insurance 3,469   2,537   3,409   3,265  
Medical services 1,064   1,053   876   706  
Drugs 726   629   742   715  
Medical supplies 220   158   162   224  
                 
Entertainment 2,976 3.60% 2,651 3.57% 2,488 4.65% 1,422 4.17%
Fees and admissions 707   551   579   276  
Audio and visual equipment and services 1,076   1,021   961   723  
Pets, toys, hobbies, and playground equipment 702   780   580   282  
Pets 555   625   454   224  
Toys, hobbies, and playground equipment 147   155   126   58  
Other entertainment supplies, equipment, and services 491   299   369   141  
                 
Personal care products and services 772 0.93% 638 0.86% 619 1.16% 491 1.44%
                 
Reading 164 0.20% 132 0.18% 146 0.27% 127 0.37%
                 
Education 880 1.06% 1,241 1.67% 349 0.65% 280 0.82%
                 
Tobacco products and smoking supplies 313 0.38% 438 0.59% 258 0.48% 89 0.26%
                 
Miscellaneous 773 0.93% 841 1.13% 672 1.26% 571 1.67%
                 
Cash contributions 3,226 3.90% 2,382 3.21% 2,391 4.47% 2,817 8.26%
                 
Personal insurance and pensions 7,163 8.65% 7,033 9.48% 3,392 6.35% 1,068 3.13%
Life and other personal insurance 566   440   559   237  
Pensions and Social Security 6,597   6,593   2,833   832  
                 
*** Total Expenses *** 61,246 73.99% 55,892 75.34% 46,757 87.48% 34,382 100.84%

Now to continue >>>

Let's address the popular rule of thumb that financial planners use today.  This is that you will need 85% of your pre-retirement income adjusted for inflation every year that you live after retirement.

If you use the "Husband and wife only" as the pre-retirement income, this is $82,773 X 85% = $70,357 per year.  If we use the "55 - 64 years" as the pre-retirement income, this is $74,182 X 85% = $63,055 per year.

The statistics say that these groups live on considerably less than 85% of their pre-retirement income.  They may live close to that amount early in retirement with travel and buying things they have always wanted, but living expenses tend to drop as retirees age.

I have created separate tables for each of the four groups so you can study a particular group in more detail.

In these tables I added two additional columns in the tables, Basic Costs and Discretionary Costs.  These classifications are debatable so feel free to change the classification as you please.

Retirement Group

Husband and Wife Only

Age 55 - 64 years

Age 65 - 74 years

Age 75 years and older

_______________

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

Finished Retirement Living Expenses - Go back to home page.



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