Retirement | April 6, 2020

Top Spending Categories in Retirement


As you build your nest egg and plan for retirement, one of the most important things is to estimate how your expenses might look like after you stop working.

One approach is to assume you’ll need only 75% to 80% of your current income once you reach retirement, since some big work-related expenses—such as annual retirement contributions and commuting costs—will likely go away.

Indeed, data compiled by the Bureau of Labor Statistics shows a reduction in spending right around the typical retirement age—65 for men and 63 for women1—and continues to decline during retirement.

Declining dollars

On average, household spending may drop upon retirement—and continue to decline as retirees age.

Source: Consumer Expenditure Survey, Bureau of Labor Statistics, 2018.

Although the 75%–80% rule may serve as a starting point to forecast your spending, eventually you’ll need to assign real numbers to your retirement budget. To that end, here are the four biggest average annual expenditures for the 65 and over age group2:

1. Housing

Average annual expenditure: $32,170

Percentage of budget: 30%

You may spend more if you live in an urban area or less if you’ve paid off your home, but either way, housing—including property tax, maintenance, and utilities—is likely to account for a substantial portion of your retirement budget and should be estimated as accurately as possible.

2. Transportation

Average annual expenditure: $16,070

Percentage of budget: 15%

Even though you’re not commuting every day, you may travel just as much as during your working years—if not more so—as you fill your days with activities, social events, and visits to family.

3. Food

Average annual expenditure: $11,560

Percentage of budget: 11%

If that seems high, consider that those age 65–74 spend nearly half their food budget on dining outside the home.

4. Health care

Average annual expenditure: $10,280

Percentage of budget: 10%

Between Medicare premiums, supplemental coverage, and out-of-pocket costs, retirees average more than $550 per month on health care—so be sure to plan accordingly.


In addition to the big four, there are miscellaneous expenses that together can rival or even exceed these single-issue expenditures. Such expenses will depend on your personal situation, but consider the following annual averages:

  • Entertainment: $6,180
  • Apparel: $3,000
  • Mobile phone: $1,040
  • Pets: $1,470

Planning is key

Even if you’re many years away from retirement, distinguishing between needs (food, health care, housing) and wants (entertainment, travel) can help you get a better sense of your priorities and range of spending. Adding the two figures together can help you to make more-informed choices today as you work toward the kind of retirement you’ve always dreamed of.

1Center for Retirement Research at Boston College, 03/2018. Data as of 2016.

2Bureau of Labor Statistics. Average expenditures are pre-tax figures and reflect households earning $100,000 or more. Data as of 2017–2018.

What You Can Do Next

  • Need help mapping out your plan? Work one-on-one with a Certified Financial Planner professional when you enroll in Schwab Intelligent Portfolios Premium. Learn more >