According to several retirement recommendations, retirees will require 80% of their preretirement income to cover their expenses.
Faced with such seemingly impossible aims, the Transamerica Center for Retirement Studies reports that 53% of pre-retirees plan to work past the typical retirement age of 65 to ensure they have enough money.
However, the 80% rule isn’t universal and could cause unnecessary stress as you plan for retirement. As you become older, your consumer spending falls dramatically. According to Bureau of Labor Statistics data, the average retired home spends 25% less than the average working household. This article outlines 10 things you’ll spend less on in retirement.
1. You will spend less on transportation.
When you retire, you’ll be able to save money on gas, your car’s maintenance, registration, insurance, and bus and rail fare. The average working household spent $9,761 on transportation each year before retirement (and the pandemic). According to data from the Bureau, the average retired household spends $6,814 per year, a 30.2% decrease in spending.
2. You will spend less on clothing.
If you’re going back to work more these days, you’re probably spending what you need to look professional. There are no more pressed shirts or high heels in retirement, and your wallet doesn’t have to keep up with your work wardrobe. Pre-pandemic, the average retired household spent $1,070 on apparel, while the average working household spent $1,866.
3. You’ll Spend Less On Food
Dining out will drop even more dramatically—by up to 35%. According to Hurst and Aguiar, the reasons are similar. When you’re at work, you may eat out frequently for fast lunches or expensive lattes on your way to work when pressed for time or don’t have control over the agenda. Retirees conserve their dining-out funds for table-service restaurants rather than fast food establishments.
4. You will spend less on entertainment.
Isn’t it true that having no job means having more time to have fun? Not so quickly. There’s a frequent notion that because you have more leisure in retirement, you’ll spend more money on entertainment—concerts, movies, clogging competitions, and so on.
5. Your housing costs will be lower.
According to the data released by the Bureau of Labor Statistics, 61.7% of Americans aged 65 to 74 had no mortgage debt, while 82.5% of those aged 75 and over have no mortgage debt.
6. You will spend less on education.
The average retired home experiences a significant reduction in personal education spending, with just around $350 set aside per year for any education, from pre-K to college. That’s down from a working household’s average annual schooling spending of $1,639 by nearly 79%. Even if you’re considering returning to school after retirement, many colleges and institutions offer classes for persons aged 65 (and in some circumstances, 55-60) and above for free (or practically free).
7. You will spend less on insurance.
Once you reach retirement age, the amount you’ll spend on insurance (excluding health coverage) declines considerably. The average household under 65 spends $8,100 per year on insurance, including annuities, life insurance, and other personal insurance plans like homeowners insurance. That number reduces to $2,840 in retirement, an almost 65% decrease in expenses.
8. You will spend less on alcohol and tobacco.
The average working home spends $381 on both tobacco and tobacco products each year, whereas the average retired household spends $198, nearly half as much—alcohol use declines as people age. According to the Bureau, the average working family spends $519 on alcoholic beverages per year, while the average retired household spends $370.
9. You will spend less on pets and pet supplies.
Pets and pet supplies cost an average of $553 per year for working households and $477 per year for retired households.
According to the Bureau, having children (especially older ones) at home increases household spending on pets.
10. You will save money on taxes.
According to the Bureau, families with people aged 55 to 64 pay an average of $2,502 in property taxes each year. This figure drops to $2,149 for homes with adults aged 65 and above and $1,924 for households with adults aged 75 and up.
Contact Information:
Email: [email protected]
Phone: 9143022300
Bio:
My name is Kevin Wirth and I have worked in the financial services industry for many years and I specialize in life insurance and retirement planning for individuals and small business owners, with a specialty in working with Federal Employees. I am also AHIP certified to work with individuals on their Medicare planning. You can contact me by e-mail or phone. I look forward to the opportunity of working with you on these most relevant areas of financial planning.
[email protected]
914-302-2300
Disclosure:
These articles are intended for educational purposes only. Please contact your advisors for legal, accounting or investment advice.
