Federal Data Shows What Retirees Typically Spend

Key Takeaways

• Households headed by someone 65 or older spent an average of about $61,000, rising just 2% from the prior year.
• Housing made up 38% of retirees’ budgets, followed by transportation, healthcare, and food.
• Retirees under 65 spent nearly 40% more than those ages 65 to 74, showing how sharply spending can vary during retirement.

Older Americans spent more overall, but much of the increase came from people who kept working beyond age 65.

New data from the Bureau of Labor Statistics shows that spending by all households headed by someone 65 or older rose 5%. But retired households in that age group spent an average of just under $61,000, up only 2% from the previous year. That gain lagged both inflation and the 2.5% Social Security cost-of-living adjustment, according to an Investopedia analysis of the data.

Housing Consumes More Than a Third of Retirees’ Budgets

Housing accounted for 38% of retirees’ spending, or an average of $22,966 a year including utilities. That is despite four-fifths of retired households owning their homes, with 57% owning them outright, according to the BLS. Property taxes, maintenance, repairs, insurance, and utilities make up about half of retirees’ housing costs.

Transportation followed at 15%, or $9,248. Healthcare came in at $7,938, slightly ahead of food at $7,749, with insurance premiums representing about two-thirds of healthcare spending.

The overall pattern is not far from that of Americans across all ages, but retirees still spend much less in total. The average U.S. household spent $81,905, roughly a third more.

Spending in the Active and Slower Retirement Years

Retirement spending usually falls with age, and the latest BLS figures show that gap clearly. Households headed by someone ages 65 to 74 spent about $62,900 on average, compared with roughly $54,500 for those 75 and older, an Investopedia analysis found. That is a decline of about 13%.

Financial planners often divide retirement into three phases: the active “go-go” years, the slower “slow-go” years, and the later “no-go” years, when health or mobility limits activity.

The difference is even larger for people who retire early. Households headed by someone younger than 65 spent nearly 40% more than those ages 65 to 74, likely because their household situations differ.

Research by retirement expert David Blanchett has also found that spending generally decreases as retirees age, even after inflation is taken into account. While healthcare costs can rise later in retirement, more recent research by Blanchett and Michael Finke suggests that typical retiree spending keeps falling rather than rebounding in the final years.

Still, lower spending does not always mean people need less. A MetLife survey found that 44% of retirees had cut back because they were worried about outliving their money, indicating that some may be hesitant to spend down savings they accumulated over decades.