Average Retiree Spend

[OldShooter]

Anything like this involved with income, assets, etc. will yield distorted numbers when averages are used. The small number of high income people will raise the average and give an inaccurate, even meaningless, picture.

Think, for example, of the average income of all inhabitants of a small rural town plus Bill Gates. The number would be something that none of the residents would recognize. Income and asset distribution in the US is something like that.

What is significant is the median spending number: Half the people above, half below. I would bet that it is significantly below the average number.

 

[aaronc879]

It amazes me how many very well off people here don't realize how well off they are. If you think $46K/yr is very low then you are very well off. My lifetime average income is around $30K/yr and I have lived a good life and managed to save 6 figures by the time I was 30. My Grandmother has been a widow for almost 20 years with her husbands pension dying with him. She has SS and a $500/mo non-cola'd annuity for a total of about $2000/mo. Round up and say $25k/yr. She has everything she needs and most things she could ever want and has never mentioned anything about feeling poor or not having enough money. Most people don't spend 5 figures on travel a year. Most people don't spend 5 figures on food/restaurants/alcohol per year. If you can and want to then that's fine but you need to realize the majority can't afford those things. Even people who worked hard for decades often can't afford those things. Not everyone had a 6 figure income and/or a generous pension.

 

[candrew]

My 86 year-old MIL gets by on a $1400/month SS survivor's benefit. No pension and no other savings to speak of. She lives simply, but lives well.

 

[scrabbler1]

It amazes me how many very well off people here don't realize how well off they are. If you think $46K/yr is very low then you are very well off. My lifetime average income is around $30K/yr and I have lived a good life and managed to save 6 figures by the time I was 30. My Grandmother has been a widow for almost 20 years with her husbands pension dying with him. She has SS and a $500/mo non-cola'd annuity for a total of about $2000/mo. Round up and say $25k/yr. She has everything she needs and most things she could ever want and has never mentioned anything about feeling poor or not having enough money. Most people don't spend 5 figures on travel a year. Most people don't spend 5 figures on food/restaurants/alcohol per year. If you can and want to then that's fine but you need to realize the majority can't afford those things. Even people who worked hard for decades often can't afford those things. Not everyone had a 6 figure income and/or a generous pension.

+1

 

[FIREd]

We are still a long way from Medicare and we spend a lot more than the average retiree household on healthcare.

But excluding healthcare, we are pretty close:
Average retiree household: $3,800-$500=$3,300 per month
And we are at $2,819 per month for non-discretionary expenses in a slightly lower than average COL area. Travel sends our actual budget well above that amount, but for a couple who does not travel a lot, it'd leave about $500 a month for fun stuff.

 

[athena53]

It amazes me how many very well off people here don't realize how well off they are. If you think $46K/yr is very low then you are very well off. My lifetime average income is around $30K/yr and I have lived a good life and managed to save 6 figures by the time I was 30.

First of all, congratulations on your savings discipline. That's impressive.

Second- in my case, I DO know I'm well off. The average monthly SS payment for 2018 is $1,404 according to The Motley Fool and a scary percentage of retirees are living on SS alone or SS plus savings that will probably be depleted in a few years. You can pare back only so much by "living the simple life" but then you start to need subsidized senior housing, SNAP benefits, Meals on Wheels, etc. And there's no room for a new set of dentures, a blown car transmission or other large-scale emergencies.

I think I spent my entire adult life focused on NOT ending up old and poor. Not much you can do about ending up old, but I could see that financial resources could really make a difference in what that old age looked like. I'm very grateful I lived long enough to enjoy the result of my planning.

 

[jebmke]

We are still a long way from Medicare and we spend a lot more than the average retiree household on healthcare.

But excluding healthcare, we are pretty close:
Average retiree household: $3,800-$500=$3,300 per month
And we are at $2,819 per month for non-discretionary expenses in a slightly lower than average COL area. Travel sends our actual budget well above that amount, but for a couple who does not travel a lot, it'd leave about $500 a month for fun stuff.

Is wine discretionary or non-discretionary. Asking for a friend.

 

[Nature Lover]

I was never really interested in statistical averages. It rarely reflects one's own reality. Standard of living for two living in SF Bay Area with no debt and paid off house:

Essentials (housing, food, medical and transportation): $45K
Routine spending: (Recreation, entertainment, gifts, travel, etc): $30k
Non-routine spending: (cars, appliances, roof, unexpected stuff, etc): $30k
Taxes: $15k

Total approximately $120k per year to fully sustain standard of living.

Similarly, for a household of 1 in the Bay Area (no debt, home paid off), I suggest the following would be reasonable starting point for basic living costs:

Essential/Recurring: ~$35-40k/yr
Non-Routine: Set aside est. $10k/yr

Note: This is after tax spending. I've excluded income taxes from the list, since income taxes are income driven; and income both varies greatly and is highly individual. Also, I haven't included travel or more costly entertainment - those also vary greatly by individual.

 

[FIREd]

Is wine discretionary or non-discretionary. Asking for a friend.

Basic wine (the kind we drink with dinner - ~$10-12 a bottle) is part of the grocery budget, so non-discretionary. Fancier bottles (Champagne, etc...) as well as spirits come from our discretionary budget.

But it is worth noting that our grocery budget is $800 a month, just shy of 2x the average quoted above for the average retiree household.

 

[street]

Those numbers are seem realistic to me. I have known many people that live on way less then that like most have said. While other need a lot more then those numbers. For an average retired couple no traveling or very little that is right there.

Good topic thanks.

 

[Offgrid Organic Farmer]

An average U.S.A retiree household (run by someone 65+) spends $3,800 per month - which I believe is pretty much in line with the median household income in the U.S.A.

That is much higher than our monthly spending.

... Health Care = $499/month, it will be nice when Medicare kicks in!

I have extremely good health insurance from my employer. So I pay a lot less.

 

[Winemaker]

Is wine discretionary or non-discretionary. Asking for a friend.

Non-discretionary.

 

[Dtail]

Non-discretionary.

Somewhat suspicious response from "WINEmaker".

 

[scrabbler1]

Note: This is after tax spending. I've excluded income taxes from the list, since income taxes are income driven; and income both varies greatly and is highly individual.

When I do my annual budgeting (more like day-to-day cash flow projections), I split my income taxes into 2 parts. One part are the steadier, more predictable income taxes based on the monthly and quarterly dividends. The taxes due on that income I build into my budget. The second part are the more income taxes from the more erratic, often volatile cap gain distributions. If my expenses rise due to those income taxes, I don't consider it a problem for my budget because I always have the money available to pay them (from the distribution itself).

That being said, because I automatically reinvest those distributions, I sometimes have to scramble a little bit to use my more regular cash inflows to cover the taxes.

 

[aja8888]

That is much higher than our monthly spending.

I have extremely good health insurance from my employer. So I pay a lot less.

I thought I read you were retired for many years and have rental property income? Are you still working?

 

[badatmath]

Not the person you were addressing, but probably he/she has retiree health ins from the former employer. Many (lucky) people I know do.

I was hoping to get to that stage but it looks like I will fail.

 

[street]

It is more then we spend a month by about $500 but still very much inline for the average people in my opinion.

 

[NW-Bound]

I only tracked spending since 2010 with Quicken. Looking back, my annual expenses for the last 12 months are 55% that of the most expensive year.

That's what happens when you are done with major home repairs/upgrades, children college tuition, gifts to help them buy home, daughter marriage, etc...

And when your stash grows "bigly" in those years despite heavy spending, you end up with 2.2% WR at the present time. The living is great during a bull market; the Dow was 10,000 in 2010 and it is 24,000 now.

Imagine somebody who was working during the above period and did not draw on his stash, and even added to it. Mucho mucho money at this point.

But I digress....

Back on what a retiree needs to spend, it can be $20K/year, or it can be $200K. It all depends on how much he has. He who has more, spends more.

But is the $200K/year guy going to live a long healthy life compared to the $20K guy? No, that takes luck more than money.

 

[Katsmeow]

My Grandmother has been a widow for almost 20 years with her husbands pension dying with him. She has SS and a $500/mo non-cola'd annuity for a total of about $2000/mo. Round up and say $25k/yr. She has everything she needs and most things she could ever want and has never mentioned anything about feeling poor or not having enough money.

This reminds me of my mom who recently died at 94. Her total income was about $24k a year and has been every since my dad died 18 years ago. Recently when she became ill I started handling her finances. I came across some bank statements from about 10 years ago.

In the last 10 years she had saved over $50k! The point being that in most years she wasn't spending $25k and had money left over. Health care last year was about $7400 of which about $5800 was Medicare/supplement/Part D premiums.

Her house was paid for. Actually last year she had some unusually high home maintenance expenses. But that didn't happen most years. She still drove and had auto insurance and auto related costs. Of course, food and utilities.

But beyond those basics she just didn't spend a lot of money. She didn't have Internet. She didn't have Cable TV. She didn't go out to eat hardly at all. She rarely bought clothes. She didn't really have hobbies (she was 94! but she didn't have expensive hobbies before that). Her big indulgence was subscribing to the daily paper.

But she spent money if she wanted to. She bought some jewelry last year. She gave me a nice Christmas present. She paid for AAA.

Even so, in most years she ended the year with more money than she started with.

 

[daylatedollarshort]

It amazes me how many very well off people here don't realize how well off they are. If you think $46K/yr is very low then you are very well off. My lifetime average income is around $30K/yr and I have lived a good life and managed to save 6 figures by the time I was 30. My Grandmother has been a widow for almost 20 years with her husbands pension dying with him. She has SS and a $500/mo non-cola'd annuity for a total of about $2000/mo. Round up and say $25k/yr. She has everything she needs and most things she could ever want and has never mentioned anything about feeling poor or not having enough money. Most people don't spend 5 figures on travel a year. Most people don't spend 5 figures on food/restaurants/alcohol per year. If you can and want to then that's fine but you need to realize the majority can't afford those things. Even people who worked hard for decades often can't afford those things. Not everyone had a 6 figure income and/or a generous pension.

I grew up pretty blue collar in the Midwest and I agree with everything you posted. In many ways I think it was an advantage as we can be happy these days with relatively low overhead, at least low for a higher cost of living area.

 

[athena53]

But is the $200K/year guy going to live a long healthy life compared to the $20K guy? No, that takes luck more than money.

I agree to some extent. Money can't keep you from getting Alzheimer's or pancreatic cancer. But- the "luxuries" I have include:

-Gym membership
-Dental implants, meaning I can still crunch my way through fresh fruits and vegetables (poor nutrition can be a serious side effect of dental problems, and they can affect your overall health as well)
-Groceries not dominated by fatty meats and processed foods, which is what many people with limited funds buy
-The means to get medical attention if I need it, rather than waiting till I can't stand it and going to the ER
-The ability to pay most out-of-pocket prescription costs. I have my limits ($80K for a round of Hep C treatment would be a shock) but I'm not likely to have to stop medication because I ran out of money.

And yes, I DO know how fortunate I am. I'm in remarkably good health (running a mile race tomorrow at age 65, and doing the 7-km bicycle portion of a team duathlon Sunday) and part of that is because I can afford it.

 

[ncbill]

It amazes me how many very well off people here don't realize how well off they are. If you think $46K/yr is very low then you are very well off. My lifetime average income is around $30K/yr and I have lived a good life and managed to save 6 figures by the time I was 30. My Grandmother has been a widow for almost 20 years with her husbands pension dying with him. She has SS and a $500/mo non-cola'd annuity for a total of about $2000/mo. Round up and say $25k/yr. She has everything she needs and most things she could ever want and has never mentioned anything about feeling poor or not having enough money. Most people don't spend 5 figures on travel a year. Most people don't spend 5 figures on food/restaurants/alcohol per year. If you can and want to then that's fine but you need to realize the majority can't afford those things. Even people who worked hard for decades often can't afford those things. Not everyone had a 6 figure income and/or a generous pension.

Helping a relative with much the same income situation.

They may even have a little more income...but they entered retirement with mortgage & HELOC payments of close to $1,000/month.

If they didn't have that to cover they'd be in much better financial shape.

 

[ExFlyBoy5]

I have extremely good health insurance from my employer. So I pay a lot less.

I thought I read you were retired for many years and have rental property income? Are you still working?

His profile indicates that he has a Navy pension, so I would assume he is using Tricare or the VA. Both of which are far, FAR cheaper than I would guess 98% of plans out there. I have Tricare Prime and the family premium is less than $600 a year with very low co-pays.

 

[ExFlyBoy5]

Here in the relatively LCOL midwest, our car payments alone run > $567 / month. Add gas, insurance, etc and we're at $1K/mo easy.

Not trying to make an assumption, but very few of the retirees that I know have ANY kind of car payment. My direct/indirect costs (purchase price, taxes, fuel, maintenance, the ENTIRE COST to date) for my current car (purchased new in 2009) has totaled $52,110 or averaged, $501 a month. This is for a car that cost $34,000 out the door. *IF* I had purchased a Honda Civic, or similar, those costs would have been substantially lower...So, I don't think that the $567 is a number that is that far off.

 

[ExFlyBoy5]

Ultimately, I think the 35K a year is fairly realistic...at least for our household. A quick review shows that our total spending in 2017 was less than 30K. This included quite a few extras, such as new gutters, a significant amount of preventive maintenance on my car at 100K miles, some dental work for the DW and two decent trips (which much was paid for my reward card benefits). My 90yo Dad's spending was far, FAR less than this...more in the neighborhood of 20K...which included quite a bit of spending on medical issues.