Written by You will discover what the average retiree spends per month. This data comes from the Bureau of Labor Statistics and it is broken down by age. We are going to focus on the income and spending of retirees 55 and older.
Retirees income at 55+
Before we talk about how much you’re spending, we are going to talk about how much you’re making. Then you will have a small idea of how much someone can safely spend in retirement. According to the U.S. government, people age 55 and older have a pretax income of $58,528. That would roughly be around $4,900 per month.
Your highest income earning years are going to be what you make over 50 until you retire. This makes sense because you have a ton of experience and have your highest title. There are many who receive pensions tied to the amount of money they make in their last years before retirement. As a result, many work extra hours to make sure they generate a higher annual salary.
Let’s talk about pretax
Just as a reminder, pretax means money you have before it is taxed. While that can feel annoying since we all have money after it has been taxed. The reason the government gives us pretax numbers is because we are all taxed differently. Different states, different incomes and different deductions can impact someone’s after-tax income. That is why pretax income is the best way to create an apples to apples comparison.
Average retiree’s income by age
From age 64-74, you can expect to have an income of $52,000 per year or $4,333 per month. That number decreases significantly once you reach the age of 75. The average income for people 75 and older is $35,500 per year or $2,900 per month. There are plenty of reasons why your household income would drop that much. The most common is you were a two-income household that is now a one-income household. You could also have benefits that were depleted over time and are living off fewer assets.
How much average retiree spends by age
Now that you know how much you can expect to make, let’s talk about how much you can expect to spend. When you’re 55 and older, you can expect to spend roughly $49,000 per year. That is approximately $4,100 per month. For comparison, your average income at 55 and older is $4,900 per month. Which means on average, you have a little bit of a buffer (keeping in mind, this doesn’t include taxes).
The numbers works in similar fashion for age 55 to 64. You can expect your spending to be under your income. It is not until you reach the 75 and older range where the numbers aren’t as favorable. Someone who is 75 or older, will spend $36,000 on average, which amounts to $3,000. Your income at this age was $2,900 per month, which means you are making about what you spend. And without knowing how much you are paying in taxes, you could be spending slightly more than what you are making each month.
What expenses do you have?
33% of your budget is usually going towards your mortgage. Whether you have a home that you own, renting or living in a retirement community… your largest expense is your home. You can expect to spend roughly $1,300 per month on housing. From there, you have transportation, food, traveling and healthcare.
When it comes to determining how much you’ll spend in retirement, you should start with your current expenses. Once you know your current expenses, you can then determine which expenses you expect to pay off before you retire. Do you plan on moving? If you do, you need to take your new cost of living into consideration.
People often talk about the warmth and beauty as reasons retirees tend to move to Florida. However, there is also a cost of living component. If you’re moving from a state like New York, your money is going to go a lot further in Florida. There are entry level positions in New York that start at $60,000, while that could be a mid-level position’s salary in Florida.
Final thoughts
The average amount you can expect a retiree to spend is somewhere between $50,000 to $35,000 annually, or $4,100 to about $3,000. Make sure you take the time to plan your retirement out properly. You want to be comfortable spending money in retirement. There is plenty of data that discusses the fear some retirees have about spending their money. Which is only natural since you have spend decades saving money for retirement. It is hard to turn the switch on to start spending the money you have been saving for so long. Heck, I have difficulties spending money now sometimes… but as God would have, he gave me a wife who has no such problem. 🙂
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