Home > Accounting and Tax Guide

The Big Expenses in Retirement to Get Ready for

When you are getting ready to enter the phase of retirement. You need to brace for the big expenses that are yet to come your way rather than to go in blindly and figure it out day by day. One of the biggest expenses in retirement is of course housing, followed by food, health care and transportation. Anticipating small changes in these areas can help you figure out how much you'll spend on these common expenses. Many people work hard to save money for retirement. But how can you predict how your spending will change in retirement?

Although no one can predict the future, research can help us to identify the main expenses of retirement and devise a plan that will keep them as low possible.

What will your retirement spending look like

The Employee Benefit Research Institute has provided data that shows the following breakdown of the largest annual expenses for older households based on a 2017 study.

Categories for Spending

Age 50-64

Age 65-74

Age 75 and older









Health Care












Gifts and Contributions








Source: Based on estimates by the Employee Benefit Research Institute from the Health and Retirement Study, (HRS).

As you age, some categories like health care and gifts/contributions can become more costly. As you get older, spending on other categories like transportation and entertainment becomes less important.

We have ideas that will help you reduce the main retirement expenses, no matter how far you are into retirement.

1. Housing

There are many ways to reduce the cost of housing in retirement.

  • Repay your mortgage
  • Reduce your living space or downsize

Get Your Mortgage Paid Off

To keep your living expenses down after retirement, it is smart to pay off your mortgage early.

Research shows that it can increase your happiness. It also shows that the most successful retirees had either eliminated their mortgage payments or significantly reduced them before they pushed forth with official retirement. This leads a large chunk of debt elimination allowing them to worry less about their financials.

Downsize Your House

Are you an empty nester or a single parent? It's time to evaluate your living situation. You may not need a large house anymore.

This could be a sign that you need to downsize and move into something more manageable. You might be able to save some money from the sale of the current house. Cashing out on the equity from your house funding retirement.  Perhaps you’ve always wanted to live in New Zealand or simply opting for a sunshine such as Brisbane. However, if you plan to move during retirement, make sure you have the ability to move into a new house without a mortgage. Deciding to move is a big decision to make, however, it is worth spending doing considering you want to make the most of your golden years and if living in the place you want to be will bring your more happiness. It may be the best decision you’ll make. You’ll however, need to budget for moving services provided by interstate moving companies or a local Brisbane removalist. As some interstate moves can run into the thousands depending on how far you are moving.

2. Food

The cost of food, excluding inflation, is one of those things that research shows stays relatively constant after retirement. It's possible to save money on food.

Shopping at a store that offers senior discounts could be a great way to reduce grocery shopping expenses. By seeking grocers that offer senior discounts, you not only save money on your shop but limiting the number of times you eat out will keep the savings going. This is because cooking at home and limiting eating out are two of the best ways to save money.

3. Health Care

The largest expense you will face in retirement is likely to be health care. As you might imagine, health care is one of the expenses that increases with age. If you are able to be on the Medicare system then great, however having a continual health insurance policy in retirement can be costly but one that is needed as you age.

Some health care policies provide seniors a free gym membership. It is often said that prevention is better than cure. This is especially true as you get older. For your physical and mental health, it's crucial to keep active and well into your golden years and avoid a lazy life. Going for walks every day to keep your heart rate up will do wonders than just sitting at home and watching your favorite TV show.

4. Transport

As you get older, the cost of transportation will likely drop. Partly because you have no need to travel and commute to work, also some conditions may prevent you from driving as you age. However, if you are thinking of purchasing a camper van and travelling as a free spirit in your retirement. You can expect your transportation costs to rise in line with that as well.

But there are ways to save money while driving, comparing auto insurance quotes is a good idea. This could help you save hundreds of dollars per year. 

If used wisely, ride share services such as Uber can offer tremendous opportunities to reduce the cost of getting around. These services can be used as an alternative to owning a car. There are also other care sharing platforms that allow you to book a car for use when you need it. If you only need a car 1 or 2 days out of a week, maybe you are better off not owning a car in retirement.

Depending on your location, you might also have access public transportation. If there is a convenient public transport system, you may choose to opt for a yearly senior pass and commute that way.

These options can help you reduce your transportation costs if you have no need for a car which will save you thousands of dollars each year in insurance, registration costs and maintenance.

5. Gifts and Contributions

Contributions and gifts are the only items that can be considered discretionary on our list. This is one category in which your spending will likely increase with age.

You should ensure that the organization receiving your large donation is a responsible a cause you fully support and that they will manage their funding in the right places.

Each charity has its overhead costs. These websites will allow you to determine how much of your donation is going towards its intended purpose and what overhead costs are.

6. Hobbies

In retirement is where most people can explore their interests a little further whether that be travelling, baking, cooking or even a car or motorbike enthusiasts. Some hobbies can be inexpensive such as learning how to cook or bake. Others may be quite an expensive hobby such as restoration of classic cars and motorbikes and paying for motorcycle transportation to auto shows to show off your prized possession. Whatever it may be that interests you, these can be costly and add up quite quickly without income coming in.

Final Thoughts

If you don't know how your expenses will be, saving money for retirement can seem daunting. The Employee Benefit Research Institute has a number of numbers that can help us get an idea of what to expect.

It's easy to cut your spending in these areas. Remember Having a budget will help you stay on track.

comments powered by Disqus