Ask most people how much they’ll need in retirement and they’ll toss out a lump-sum figure they heard somewhere. Ask what retirees actually spend in a year, and you’ll usually get a shrug.
The government knows. It tracks exactly that in its Consumer Expenditure Surveys, run by the Bureau of Labor Statistics. In 2024, the latest full year available, households headed by someone 65 or older spent an average of $61,432.
That’s about $5,119 a month. Their average income before taxes was $67,462, or about $5,622 a month. That leaves roughly $500 a month of breathing room — before income taxes take their cut.
I’ve been a CPA since 1981, and I can tell you that a gap that thin doesn’t leave much room for surprises.
So let’s open the books. Here are seven big categories — together about 93% of the total — what retirees spend on each and one way to spend less.
One note before we start: These are averages, and they’re 2024 figures. The BLS is scheduled to release its 2025 numbers on Oct. 29.
1. Housing is the giant
Those households spent an average of $22,193 on housing in 2024. That’s about 36% of everything they spent, or roughly $1,849 a month.
Think about that. Housing alone ate more than health care and food combined. And a paid-off mortgage doesn’t make it go away.
In the government’s survey, housing covers far more than rent or a mortgage interest. It also includes utilities, household services, supplies, furnishings and appliances, according to the BLS glossary. Property taxes and insurance keep coming long after the last house payment.
What to do instead: Attack the bills that never stop, starting with insurance. Here are smarter ways to cut your homeowners insurance bill.
Then look at heating and cooling. Energy Star says its certified smart thermostats save about 8% of those bills, or roughly $50 a year, on average.
2. Transportation still costs plenty
No commute doesn’t mean no car costs. Older households spent $9,538 on transportation in 2024 — about 15.5% of their spending, or roughly $795 a month.
That category covers buying and financing vehicles, plus gas, maintenance, insurance and public transit. In other words, it’s the price of every car in the driveway, not just the one you drive most.
What to do instead: If a second car mostly sits there, sell it. For the car you keep, drive gently.
Fueleconomy.gov says speeding, jackrabbit starts and hard braking can sap your highway fuel economy roughly 15% to 30%. And before your next service visit, learn how to shrink a car repair bill.
Insurance alone cost these households $1,558 in 2024, or about $130 a month. If you haven’t shopped your policy lately, you can compare car insurance quotes here.
3. Food is mostly groceries
Older households spent $7,940 on food in 2024, about 12.9% of their total. Of that, $5,251 went to groceries and $2,689 went to meals away from home.
That’s about $438 a month at the store and $224 a month eating out. That eating-out number works out to roughly $52 a week.
What to do instead: Waste less before you buy less. The U.S. Department of Agriculture estimates that 30% to 40% of the nation’s food supply goes to waste. Shop with a list, eat what’s in the fridge first and try a few easy grocery swaps.
4. Health care is big, but not the biggest
Here’s the surprise for a lot of people. Older households spent $7,799 on health care in 2024. That’s about 12.7% of their spending, or roughly $650 a month. That’s real money, but it’s about a third of what housing costs.
The category includes health insurance premiums, medical services, drugs and supplies. For people on Medicare, that typically means premiums, supplemental or Advantage plans and prescriptions.
What to do instead: Use the deadline in front of you. Medicare’s open enrollment runs Oct. 15 to Dec. 7, and it’s when you can switch drug plans or Advantage plans for next year.
Compare your options instead of letting your plan roll over, and see these other ways to cut Medicare costs.
A quick nudge — when it comes to money, the best day to get smart was 20 years ago. The second-best is today. Sign up for the free Money Talks Newsletter and start now. Takes 10 seconds, costs nothing, and could change your retirement.
5. Insurance and pensions don’t stop at 65
Older households spent $3,480 on personal insurance and pensions in 2024, about 5.7% of their spending.
That sounds odd for retirees until you see what’s in it. The BLS counts Social Security payroll taxes and retirement plan contributions here, along with premiums for life insurance and other non-health coverage. If you’re still working past 65, your payroll taxes land here.
What to do instead: Take a hard look at any life insurance you’re still paying for. If it was bought to replace a paycheck for kids who are now grown, ask whether anyone still depends on that payout.
If nobody does, you may be paying for protection you no longer need.
6. Cash gifts and donations add up
Older households gave away $3,158 in cash contributions in 2024, about 5.1% of their spending. In BLS terms, that’s money to people or groups outside the household: help for family members, support payments and donations to churches, charities and causes.
Generosity is a fine use of money. Just make sure it’s a choice, not a habit you can’t afford.
What to do instead: If you give to charity and own a traditional IRA, ask about a qualified charitable distribution. According to the IRS, you must be at least 70½, and a QCD that meets the rules can be nontaxable. It can also count toward your required minimum distribution.
7. Entertainment is easy to trim
Older households spent $3,025 on entertainment in 2024, about 4.9% of their spending, or roughly $252 a month. The category includes fees and admissions, TVs and audio gear, pets, hobbies and toys.
It’s also one of the categories you control most. Nobody’s forcing you to keep six streaming services.
What to do instead: Count your subscriptions, and see what streaming really costs these days. And if you’re 62 or older and a U.S. citizen or permanent resident, the National Park Service sells a lifetime Senior Pass for $80.
Spending tends to drop with age
Here’s the good news. In the government’s numbers, the oldest households spend less. In 2024, households headed by someone 65 to 74 spent $65,354, while those headed by someone 75 or older spent $55,834.
By my math, that’s $9,520 less, a drop of nearly 15%, or about $793 a month. Keep in mind that’s a one-year snapshot of different households, not the same people tracked over time.
For comparison, the average for all U.S. households was $78,535 in 2024.
But averages don’t pay your bills. Your own numbers do. Pull 12 months of bank and credit card statements, sort every dollar into these seven buckets and compare your totals with the ones above.
Wherever you’re well above average, that’s where to dig first. If you’d like a tool to help, here’s where to find a budgeting app. And while you’re at it, check this list of things you should almost never buy in retirement.
Retirement doesn’t fail because of one big mistake. It leaks away a few hundred dollars a month at a time. Find the leak, and you’ll have more to spend on what you actually care about.