Biggest Retiree Expenses and How to Minimize Them

Retirement

Jan 7

According to the most recent Bureau of Labor Statistics (BLS) data, retiree households—led by individuals aged 65 or older—spent an average of $61,432 in 2024, 2.2% more than the previous year. By comparison, average spending across all U.S. households was $78,535 (a year-over-year increase of 1.6%). In this article, we’ll cover the largest expenses the average household encounters during retirement along with a few tips on how to minimize the same.

Biggest Retirement Expenses Graphic Vision retirement RIA fiduciary financial advisor

Housing

Many retirees look for ways to slash housing costs as they get older by downsizing, moving to a more affordable area, or pursuing other cost-saving strategies. Per BLS data, however, these savings often aren't as dramatic as one might assume. In 2024, retiree households spent an average of $22,193 per year on housing—including mortgage payments, rent, property taxes, insurance, maintenance, and repairs. That's about $1,849 per month, comprising over 36% of annual spending. For comparison, the average U.S. household spent $26,266 on housing in the same period (33.4% of their yearly expenses).

Factors driving housing expenditures

Digging into the numbers, retirees spent $12,995 (59%) on housing costs (e.g., mortgage principal payments) if they owned their home. They also paid $4,618 (almost 21%) on mortgage interest, other charges, and property taxes plus $3,578 (16.1%) on items such as maintenance, repairs, insurance, and other housing expenses.

Tips to keep housing expenditures low in retirement

If you can, pay off your mortgage and build up equity before retirement to help make your living expenses much more manageable and add more flexibility to your budget after you stop working. If paying off your mortgage isn't possible, consider downsizing or moving to a state with a lower cost of living to help keep housing costs low in retirement. It's also important to plan ahead for future housing needs since most homes aren't built with aging in mind. Knowing expenses associated with wheelchair accessibility, bathroom renovations, or converting to a one-level layout can add up quickly, think about such things early on to avoid surprises down the road.

Transportation

While commuting expenses will undoubtedly shrink when you retire, not all transportation costs will follow suit. You'll still need to budget for things like vehicles, gas, insurance, maintenance, repairs, car rentals, leases, car payments, and public transportation. The average retiree household spends $9,538 annually (compared to $13,318 across all households) on transportation costs, 5.6% more than what was reported the previous year due to higher new and used vehicle costs, increased insurance premiums, and a rise in spending on public transportation and airfare.

Tips to keep transportation expenditures low in retirement

Engaging in a meaningful discussion about transportation expenses is critical as you prepare for retirement, especially for those set to live on a fixed income. Most seniors over age 65 live in car-dependent suburban and rural communities (according to the advocacy organization Transportation for America), making it even more important to plan ahead for these costs. Shopping around for auto insurance every year is a smart way to save money, especially if sharing one car between you and your partner isn’t practical. Ride-hailing services (e.g., Uber or Lyft) can also save you money compared to traditional car ownership, meanwhile, if your transportation needs are light.

Food

Switching gears now to food, this category encompasses both groceries purchased for home consumption and dining out. Retiree households spend an average of $7,940 annually on food (representing a year-over-year increase of 3%), with the average U.S. household spending $10,169 each year.

Dining at home vs. away from home

These expenditures break down to an average of $5,251 for food consumed at home and $2,689 for dining out, with a slight decrease in the latter compared to the previous year ($2,741).

Tips to minimize food expenditures in retirement

You can employ various tactics to save money on groceries including buying in bulk (Costco, BJ’s, and Sam’s Club memberships fit the bill here) and switching from name brands to store brands. Additional ways to cut food costs include clipping coupons, making and sticking to shopping lists made in advance, frequenting stores that offer senior citizen discounts, and using a credit card (or app) that offers a strong cash back or points accumulation program for grocery purchases. While dining out less frequently is certainly an option to help curb food expenses as well, you’ll need to strike a balance here—especially if you head to restaurants with others as a social activity. After all, relationships are one critical factor needed for a happy retirement.

Healthcare

Healthcare—which includes health insurance, medical services, supplies, and prescription drugs—ranks as the third-largest expense for retiree households who spend an average of $7,779 on this each year. The average U.S. household, in comparison, spends $6,197.

Factors driving healthcare expenditures

Healthcare is a major—and often unpredictable—expense in retirement, so it’s important to plan ahead for increased needs in this regard. Interestingly, retiree households recently experienced a 3.1% decrease in their healthcare spending. Health insurance premiums make up about 65% of these costs, with the rest going toward medical services, supplies, and prescription drugs.

Tips to minimize healthcare expenditures in retirement

Reducing healthcare costs in retirement is indeed possible with the right strategies and planning. Actionable tips to help you keep your medical expenses under control while maintaining your health and peace of mind include…

Understanding how Medicare works

If you’re nearing retirement, it’s smart to know exactly what Medicare covers—and what it doesn’t—before you leave the workforce to help avoid unexpected costs and potentially save hundreds of dollars each year. A recent Harris Poll survey, likewise, found that more than 70% of people over age 50 wish they understood Medicare better. The program is comprised of four parts, each covering different healthcare services. Nearly all U.S. doctors and hospitals accept Medicare Part A and Part B—“Original Medicare”—with the government paying providers directly. For more details, check out our comprehensive guide to Medicare basics, and don’t miss our article on common Medicare mistakes to avoid.

Planning for long-term care

It’s also important to learn about long-term care. Even if you don’t think you’ll need a policy, you should at least know what this covers and explore available options. Pay close attention to potential out-of-pocket costs if you aren’t covered, and factor these expenses into your retirement plan. Estimating and preparing for healthcare costs—including possible long-term care and expenses related to chronic illnesses—is a vital part of successful retirement planning.

Considering an HSA

If you qualify, consider opening a health savings account (HSA): a valuable tool to help cover healthcare costs in retirement, offering tax advantages and flexibility for medical expenses.

Not forgetting about preventive care

Finally, don’t underestimate the power of preventive care. Regular exercise and healthy eating habits can help you save on healthcare costs, especially when it comes to prescription drugs. According to various sources (e.g., WebMD), approximately30 minutes of daily activity that gets your heart going and blood pumping (such as a brisk walk) can benefit you greatly: helping to lower your blood pressure, preserve bone, muscle, and joint health, ease symptoms of depression or anxiety, reduce your risk of heart disease, and better manage chronic conditions such as diabetes and arthritis.

Utilities

The fifth-largest expense for retiree households is utilities including gas, electricity, water, phone, and internet service costs. On average, retiree households spend about $4,480 annually (a 4% increase from the previous year)—slightly less than the $4,736 all households shell out for these services.

Tips to minimize utility expenditures in retirement

You can do several things to reduce utility bills including installing programmable thermostats, using LED light bulbs, replacing outdated appliances, and sealing air leaks around doors and windows.

Entertainment

The average retiree household spends $3,025 a year on entertainment: both products and experiences related to event fees and admission costs, country club memberships, television, radio, and sound equipment, pet toys, and veterinary services. The category also includes equipment such as exercise gear and athletic shoes. In comparison, the average consumer household spends $3,609 per year on entertainment.

Factors driving entertainment expenditures

Entertainment costs for retirees went up by 4.4% over the past year thanks to increases across all categories. The jump isn’t surprising when you take into account inflation and how retirees typically have more free time for leisure activities than working adults.

Tips to save on entertainment expenditures in retirement

The entertainment category loops in a wide range of products and activities, many of which can indeed positively impact your health/happiness and strengthen your social connections. To save on these costs in retirement, look out for senior discounts, use credit card perks, and shop online with a strategy. You can also maximize your savings by using promo codes and checking deal sites such as retailmenot.com, couponcabin.com, and rakuten.com (please note Vision Retirement is not affiliated with any of these websites).

Rising retiree costs

Keep in mind annual expenditures for retiree households will only increase as time marches on. In 2016, for example, the average retiree household spent $45,756 (~$3,800 a month) in comparison to $61,432 (~$5,100 a month) today. The further away you are from retirement, the higher the threshold in this respect—which makes planning for retirement that much more imperative.

In sum: retiree household spending

If you haven’t done so already, adopt a prudent approach and meet with a CFP® professional who can help you plan for and get the most out of retirement.

Want to find out if you’re on track to retire? Schedule a free consultation with one of our CFP® professionals to learn more.

About the author
The content in this post was developed by our team of writers and reviewed by our team of CFP® professionals here at Vision Retirement.

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