Spending Habits of Individuals Aged 55 and Above: Are You Frugal Enough?
In retirement, transportation costs may decrease, but they can also increase depending on individual circumstances. To better understand the average annual spending figures for key categories in retirement, we turn to data from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey for 2023.
Housing
For those aged between 55 and 64, the average annual expenditure on housing was $25,595, while those aged 75 and older spent $20,370. This decrease in housing costs with age could be due to factors such as paying off mortgages, downsizing, or relocating to cheaper areas.
Healthcare
Healthcare spending increases with age, with those between 55 and 64 spending $7,164 in 2023, compared to $8,145 for those 75 and older. The healthcare expenditure for retirees aged 75 and older was not explicitly separated in the sources, but retirees in this age group spent about $53,031 annually in total, with healthcare being a significant part of that spending.
The need for long-term care and caregiving drives up the costs of healthcare in retirement. However, it's important to note that Fidelity Investments estimates that a 65-year-old retiring in 2025 will spend $172,500 in healthcare over their lifetime, excluding long-term care facility stays.
Other Expenses
Lifestyle creep can be a significant issue in retirement, especially in the early years. To keep it in check, it's important to budget carefully and be mindful of spending habits. The older you get, the less you'll spend on transportation, food, entertainment, and apparel and services in retirement.
For instance, people between 55 and 65 spent $10,069 for food, $1,927 for entertainment, and $3,899 for apparel in 2023. In contrast, people 75 and older spent $6,508 for food, $2,131 for entertainment, and $958 for apparel and services in the same year.
Key Areas of Retirement Spending
Housing, transportation, food, health care, entertainment, insurance, and apparel are key areas of retirement spending closely tracked by the government and economists. Retirement spending tends to vary depending on the stage of retirement, from early active years to final years.
However, it's crucial to remember that retirement budgeting is not an exact science, and the amount needed is often unknown until retirement is experienced. Transportation costs for people in their mid-50s to mid-60s were $14,443 in 2023, compared to $10,899 for those in their mid-60s to 70s, and $6,448 for those 75 and beyond.
In conclusion, understanding the key areas of retirement spending and their trends can help individuals plan for their golden years more effectively. By being mindful of lifestyle creep, budgeting carefully, and keeping an eye on changes in spending patterns, retirees can make their savings last and enjoy their retirement to the fullest.
