Do Expenses Really Go Down in Retirement? What the Data Tells Us
Do Expenses Really Go Down in Retirement? What the Data Tells Us
It’s a common assumption that when someone retires, their expenses will drop. Retirement plans can often be built around this assumption, putting the retiree in a precarious position if it turns out not to be true.
But what does that data actually tell us about this? Everyone is different of course, but knowing what tends to happen on a broad scale can be helpful in giving us clues on how we might behave when that time comes.
Let’s dive in.
The Retirement Spending "Smile"
Several retirement studies have found that spending tends to follow what researchers call the Retirement Spending Smile. In the early years of retirement, spending can often stay the same or even increase as retirees travel, pursue hobbies, visit family, and enjoy activities they may have postponed during their working years.
As retirees move into their late 70s and early 80s, spending often declines as travel decreases and lifestyles become less active. Later in life, spending may rise again as healthcare and long-term care costs increase.
In other words, retirement spending can often follow this path:
Higher Spending → Lower Spending → Higher Spending. The result resembles a smile when graphed over time.
The Biggest Expense That Usually Disappears: Retirement Savings
One of the largest "expenses" many people forget about is the money they were saving while working. If you were putting 10% to 20% away into retirement while you were working, that will obviously discontinue at retirement.
If all other expenses remained the same and only that one factor was removed, that would still be a substantial decrease in overall money outflows.
Other Expenses That Often Decline in Retirement:
Transportation
With daily commutes now out of the picture, fuel costs and maintenance should decline. Some households even find they can reduce from two vehicles to one.
Clothing
Professional wardrobes, dry cleaning, and work-related attire often become less important after retirement, if not completely irrelevant.
While clothing expenses rarely disappear, many retirees spend less than they did during their working years.
Payroll Taxes
Workers pay Social Security and Medicare taxes during their careers.
Retirees generally no longer pay these taxes on retirement income, creating an additional reduction in cash outflows.
Housing Costs (Sometimes)
For retirees who enter retirement with a paid-off mortgage, housing expenses may decline significantly. However, property taxes, insurance, maintenance, and utilities remain.
For many retirees, housing continues to be their largest expense category.
Expenses That Often Increase:
Travel and Recreation
This is especially true in the first years, as new retirees often want to get busy traveling to the places they have been postponing while they were working. Many retirees actually spend more during the first decade of retirement than they did while working.
Healthcare
Healthcare is one of the few spending categories that almost universally increases with age.
According to recent data as of 2026, Americans age 65 and older spend nearly $7,800 annually on healthcare on average, with health insurance premiums representing a significant portion of that total.
In addition, some research suggests that a married couple retiring today may need several hundred thousand dollars over retirement to cover healthcare expenses not reimbursed by Medicare.
Long-Term Care
Long-term care is often the largest wildcard in retirement planning.
Many retirees will never face substantial long-term care costs, while others may experience significant expenses associated with home health care, assisted living, or nursing care.
This uncertainty is one of the primary reasons retirement planning should include contingency reserves.
The main takeaway is that certain types of expenses do decrease during retirement, while others may increase. On the whole, expenses will likely decrease over time as retirees become less mobile and active. However, health care and long-term care specifically, are the less predictable expenses that may increase substantially later in life.
What to do from a Planning Perspective:
It’s better to overestimate expenses and end up having more money, than to underestimate them and deplete your retirement savings too quickly. You should definitely plan for expenses you know with certainty will be going down, such as a mortgage being paid off. But as a general rule of thumb, it would be prudent to assume your overall spending will stay the same in retirement, at least initially. If your plan is to travel the world when you retire, you should plan for those travel expenses on top of your everyday spending.
This will require extra money in your nest egg before you retire. But it’s far better to work an extra year or two or three than to retire before saving enough and having to re-enter the workforce years later.
Need help with your retirement plan? I'm here to help.
Everest Wealth Advisors is a wealth advisory firm that helps individuals, families, and business’s navigate complex financial decisions through personalized, goal based planning and disciplined investment strategies.
Ryan Page, CFP®, MBA®
Office & Text:720-826-1092
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
