The most thoughtful older adults take their time and carefully estimate their retirement expenses well in advance of living out their retirement. This makes perfect sense because, now that you’re not working, you’ll need to make sure your retirement funds can cover those costs without stress. Let’s examine some typical monthly retirement expenses and, more importantly, how having the ideal living arrangement can help to reduce them, whether you’re planning to retire soon or are already retired and want to stretch your money even further.
Understanding the average monthly retirement income and expenses is crucial for planning a comfortable and financially secure retirement. This article dives into the latest data on average retirement spending and income, providing insights into how much retirees typically live on each month and how these figures vary across different states.
Average Monthly Retirement Spending
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month. This means that, on average, people ages 65 and older spend about $3,000 less than their total income each year.
However, it’s important to note that this is just an average. Individual retirement expenses can vary significantly depending on factors such as:
- Location: Cost of living varies greatly across different states and cities.
- Lifestyle: Some retirees may choose to live a more frugal lifestyle, while others may opt for more luxurious options.
- Health care costs: Medical expenses can be a significant drain on retirement income, especially for those with chronic health conditions.
- Debt: Retirees with outstanding debt may need to allocate a portion of their income towards repayments.
Average Monthly Retirement Income by State
Data from SmartAsset reveals that the average monthly retirement income varies widely by state, ranging from a low of $20,542 in Indiana to a high of $43,080 in the District of Columbia. This disparity is likely due to differences in local wages, cost of living, tax rules, and the prevalence of pension plans.
Here’s a breakdown of the average monthly retirement income by state:
| State | Average Monthly Retirement Income |
|---|---|
| Alabama | $24,896 |
| Alaska | $36,023 |
| Arizona | $28,725 |
| Arkansas | $21,967 |
| California | $34,737 |
| Colorado | $32,379 |
| Connecticut | $32,052 |
| Delaware | $31,283 |
| District of Columbia | $43,080 |
| Florida | $30,158 |
| Georgia | $27,961 |
| Hawaii | $32,294 |
| Idaho | $24,752 |
| Illinois | $31,223 |
| Indiana | $20,542 |
| Iowa | $22,308 |
| Kansas | $23,294 |
| Kentucky | $24,419 |
| Louisiana | $26,512 |
| Maine | $25,545 |
| Maryland | $35,732 |
| Massachusetts | $31,198 |
| Michigan | $24,389 |
| Minnesota | $26,385 |
| Mississippi | $23,347 |
| Missouri | $24,125 |
| Montana | $25,463 |
| Nebraska | $23,821 |
| Nevada | $31,171 |
| New Hampshire | $26,395 |
| New Jersey | $30,660 |
| New Mexico | $29,707 |
| New York | $30,326 |
| North Carolina | $25,324 |
| North Dakota | $23,347 |
| Ohio | $26,316 |
| Oklahoma | $23,963 |
| Oregon | $28,565 |
| Pennsylvania | $24,392 |
| Rhode Island | $27,118 |
| South Carolina | $26,227 |
| South Dakota | $24,020 |
| Tennessee | $23,715 |
| Texas | $27,471 |
| Utah | $28,632 |
| Vermont | $24,870 |
| Virginia | $35,306 |
| Washington | $29,351 |
| West Virginia | $21,118 |
| Wisconsin | $25,378 |
| Wyoming | $26,465 |
Using Average Retirement Income Figures
Average retirement income figures can be helpful for several purposes:
- Benchmarking your savings: Comparing your expected retirement income to the average in your state can give you a sense of how you measure up and prompt you to increase retirement contributions if you fall short.
- Understanding cost of living differences: The wide variation in average incomes shows that living costs and taxes vary greatly in retirement depending on where you live. This could influence decisions about where to retire.
- Estimating retirement budget ranges: The state averages provide a ballpark estimate of retirement income ranges to consider when planning monthly budgets in retirement. This can help you set savings goals tailored to your state.
Limitations of Average Retirement Income Figures
While averages provide helpful context, your specific circumstances are more important considerations than how your state compares. Within each state, there may be many outliers who earn much more or less than the average, and you may be at one extreme or the other.
The cost of living, taxes, and lifestyle you desire in retirement could also differ greatly from the average in your state. In that case, you would need more than the average income to retire comfortably.
The averages give useful perspective, but your specific retirement readiness depends on your own income, assets, expenses, and retirement timeline.
Additional Resources
- SmartAsset: Average Monthly Retirement Income by State
- RetireGuide: Average Retirement Spending in 2023
- U.S. Bureau of Labor Statistics: Consumer Expenditure Survey
By understanding the average monthly retirement income and expenses, you can gain valuable insights into how much you need to save for a comfortable retirement and make informed decisions about your financial future. Remember, your specific circumstances should guide your planning, and it’s always wise to consult with a financial advisor for personalized advice.
Managing Expenses by Moving to a Retirement Community
Calculating your typical monthly retirement expenses is only the first step; controlling those costs is a completely different matter. While there exist numerous strategies to cut costs on an individual basis, relocating to a retirement community is one surefire way to address all of them at once.
To be more precise, relocating to a continuing care retirement community (CCRC) assists you in handling almost all of the expenses you will incur in retirement.
This might sound hard to believe, but it’s quite true. Let’s examine each of the above-mentioned costs and see how being a resident of a CCRC helps manage them.
- Relocating to a retirement community helps you keep housing costs under control because you won’t have to worry about things like property taxes. Furthermore, regular costs for maintenance, landscaping, and repairs are combined into a single monthly payment, which is frequently less expensive than paying these expenses separately, particularly in the event of an emergency like the need for a new roof or water heater.
- One of the best reasons to move into a CCRC is to reduce healthcare costs because these communities can provide long-term care regardless of how it changes over time. Furthermore, the cost of that care won’t fluctuate over the course of your stay with what is commonly referred to as a Type A long-term care contract, minimizing the chance that your medical expenses will rise over time.
- Living in a retirement community reduces transportation expenses because many CCRCs provide support and transportation options. This can include visits to nearby medical facilities as well as malls and other attractions. This can lessen your need for a personal vehicle overall and the costs associated with it. Furthermore, a lot of the things you might want to travel for are available on campus, including a fitness center, a swimming pool, walking trails, woodworking shops, performance centers, and more.
- Living in a retirement community can also reduce your costs for entertainment and food. A vast range of amenities are available at CCRCs, giving you the chance to fully enjoy your retirement. On-campus dining options, on the other hand, assist you in managing your food expenses by giving you affordable substitutes for eating out while maintaining the quality of fine dining.
Estimating the Average Retirement Expenses in a Year
Even though retired people usually have fewer expenses than they did when they were working—fewer commuting costs, for example, plus disability insurance premiums and other costs associated with working—the simple act of comfortably residing comes with a number of expenses.
In fact, the U.S. Bureau of Labor Statistics states that in 2021, the average retiree household spends around $50,000 a year in living expenses. Interestingly, this compares favorably to the average for all households in the United States, which stood closer to $63,000, but it’s still a substantial figure. Let’s break down the biggest expenses in retirement.
Starting off with one the biggest expenses in retirement. Housing costs accumulate because they take into account not only the mortgage or rent, but also the payment of property taxes, homeowner’s or renter’s insurance premiums, and any costs associated with upkeep or repairs for the home. In addition, you have to pay for utilities since you’ll need heat, electricity, and other costs for things like landscaping, trash collection, and TV, phone, and internet. Put another way, even with a paid-off house, one of your biggest expenses is still housing. Thus, be sure to include everything in your budget.
Healthcare comes in second place and is equally important as housing. Major costs include health insurance, paying for medical services and supplies, and filling prescriptions. Because older adults frequently depend on high-quality medical care to stay well into retirement, these costs become crucial. Medicare covers some of these costs, but not all. Your monthly costs will soar if you ever require long-term care, so it’s best to budget for this well in advance.
People who are retired for an extended period of time typically see a decrease in their transportation expenses. This is particularly valid for those who travel long distances for work. However, this expense does not go away completely; you will still be responsible for paying for any costs associated with using your own car. This covers maintenance, registration fees, gas and insurance, and payments for auto loans or leases. Your projected retirement expenses will also include the cost of public transportation even if you do not own a personal vehicle. Simply put, you won’t be paying as much as you did to travel to your job!
Of course, travel is another cost related to transportation, and that may rise in the future. The only thing stopping you from taking vacations wherever you choose now that you are retired is making sure you have budgeted for them.
Food expenses can also add up when you eat out and cook your own meals. Considering that you still need to eat even if you’re not working, this is the one expense that might not change significantly in retirement.
Nevertheless, you can decide you want to go out to eat more, perhaps even just for breakfast at your favorite neighborhood diner. Additionally, you’ll have more time to engage in more enjoyable activities, such as watching more movies, visiting the city more frequently for events or museums, engaging in your preferred pastimes, or doing anything else you want to do. As a result, setting aside money for entertainment in your budget is a smart idea.
Average Retiree Income by Age | How Do You Compare?
FAQ
Can you live on $3,000 a month in retirement?
How much do most retirees live on per month?
What is the biggest expense in retirement?
What is a good monthly income to retire on?
How much do retirees spend a year?
To help inform your savings plan, we’ll look at average retirement spending habits for current retirees and their largest expenses and outline helpful budgeting and savings tips. In 2021, the average spending for those aged 65 or older was $52,141 per year, which comes down to $4,345 monthly.
What is the average monthly retirement benefit for Social Security?
As of January 2024, the average monthly retirement benefit for Social Security was $1,860, according to the Social Security Administration. Retirement income can come from a variety of places. A 2023 report from the Federal Reserve System found the following percentages of retirees age 65 and older reported having these top sources in 2022:
What is the average retirement income in the United States?
The average household retirement income in the United States is $27,617, according to an analysis by Wisevoter of data from the U.S. Census Bureau’s American Community Survey. However, depending on where you live, your local average may be much higher or lower.
What is a good monthly retirement income?
A good monthly retirement income is typically 80% of pre-retirement income; advisors often suggest a range between 70% and a more conservative 90%. Median income for households headed by someone over 65 was $50,290, or $4,191 per month, in 2022 according to the U.S. Census Bureau.