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  • Writer's pictureHarry N. Stout

259- What Will You Spend in Retirement?

As you plan for retirement and your journey through the FinancialVerse’s Fulfilling Stage, planning and paying for the costs of living become real and important. You must fund these costs from the income and assets derived from the combination of your personal savings, employer-provided retirement plans and governmental programs. Having enough cash to sustain your lifestyle is one of the keys to retirement planning. In this post, I will discuss planning for spending in retirement.


To properly plan, you need to have a very clear understanding of your housing, transportation, food, health care, entertainment, charitable support, travel and other financial commitments such as support for adult children or grandchildren. Many financial planning professionals say that in retirement, you will need less money because your living expenses in your later years decline. As someone who is in his later years, I can tell you some categories of expenses do decline while others increase, and some new types of costs emerge (e.g., long-term care insurance premiums).

For each household, these expenses may differ substantially. The best approach I think you can take is to look at your planned expenditures in two major buckets—discretionary and nondiscretionary—and plan accordingly. This approach will help you deal with the cost reality of no longer working full time and new activities you are planning.

Let’s look at how these costs—discretionary and nondiscretionary—break down.

Discretionary Costs

I have heard Tom Hegna, the nationally recognized speaker on retirement income (, discuss the key phases of later life that need to be planned. These phases are the go-go, slow-go and no-go phases. The exact timing of these phases differs for each person based upon his or her personal needs, health and family circumstances. These phases directly affect your discretionary expenditures and how much you need to save to fund them.

For example, you see many people postpone traveling until they reach older ages, during which they book several cruises per year, travel on group trips or visit places in the world they have always wanted to see. These are the go-go people. On the other hand, there are people who cannot visit the places they want or do the things they had planned because of health or caretaking responsibilities - the no-go crowd.

Another consideration is the person who has led an active life and traveled extensively and wants only to give back or donate their time and money to charitable causes they feel strongly about. Each person needs to plan a different amount of discretionary spending in retirement. One pattern is clear to me, and that is as a person gets older, the discretionary expenditures usually lessen.

Also, if your plans are to make charitable contributions of your time or money as part of your later years, you need to plan for these years ahead to have the necessary funds set aside.

Nondiscretionary Costs

According to the latest Bureau of Labor Statistics Expenditure Survey data, released on September 9, 2021, for the year 2020, “older households"—defined as those run by someone sixty-five and older—spend an average of $47,579 a year, or $3,965 a month. Your actual spending will depend on a number of factors, including where you live, your desired lifestyle and what you decide to spend on nondiscretionary items.

Here’s the BLS data shown as a monthly breakdown of how households headed by a person aged 65 and older spend money, on average, for seven major categories:

  • Housing: $1,453 You may be close to paying off your mortgage, but housing is still the biggest spending category for all age groups, retirees included. Some costs never go away, even when a home loan is fully paid. This monthly expenditure includes property taxes, insurance, utilities, repairs, maintenance and household supplies.

  • Transportation: $518 People older than sixty-five do catch a break on transportation costs. The $6,221 annual average outlay, which includes the costs of gas, insurance, maintenance, and repairs, is about one-third less than younger households shell out each year.

  • Health care: $556 Insurance premiums—which run over $4,000 a year on average for the sixty-five-plus set - are a spending category that just gets bigger as you age, at least until seventy-five, when BLS data shows those costs dipping.

  • Food: $475 This is another major budget category for all ages. Yet, older individuals spend nearly 20 percent less than the average younger household does on food.

  • Personal insurance/pensions: $227 Those in the household who are still employed (bringing in earned income) are required to pay their fair share of salary to Social Security and perhaps even the company pension, which combined account for the bulk of this average monthly expense.

  • Cash contributions: $260 Apparently, with age comes a greater appreciation of one’s financial blessings. This age group reports dedicating $3,119 of their annual income to “cash contributions” (which include charitable donations).

  • Entertainment: $191 Living it up without having to get up and go into the home or work office early the next morning is a perk of retirement.

A key reminder when looking at these projected costs is that the BLS survey amounts include the normal activities of daily life, but do not include paying for large discretionary items, major charitable gifts of time and money, and major out-of-pocket items such as major illness related health care costs. As we have discussed in other posts, health care costs are the financial wild card of preparing for retirement.


Maintaining your lifestyle and ability to spend as you desire has to be one of the most important, if the most important, objective of retirement planning. To approach this planning you need to fully understand what constitutes your non-discretionary and discretionary spending needs. The key to a secure and stress-free Fulfilling Stage of your financial life is the ability to have the freedom to enjoy life. This can only be done if you have the cash income to pay your bills.


Ready to improve the quality of your financial life? Harry is the host of a new podcast from the FinancialVerse where he shares practical ways to relieve money stress and anxiety. Each 7 to 10-minute episode is designed to fit into your busy lifestyle. Subscribe today or just ask Alexa or Siri to play the FinancialVerse podcast.

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