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These 5 Boring Expenses Can Derail Your Retirement - Plan Ahead Now

It’s finally time to retire! Quick, what’s your biggest expense going to be?

Golf club membership and green fees?

Afternoons at the spa or salon?

Dinners out at that fancy new restaurant downtown?

Spoiling the grandkids with a trip to the Grand Canyon… or Europe… or Disney World?

Surprise! The much more likely answer is actually housing.

Don’t get me wrong; every one of the above activities will cost an arm and a leg. But it turns out the real expenses lurking in retirement are much more every day and mundane.

Sure, everyone expects to shell out for fun stuff, but it's the ongoing, regular costs that can catch you off guard. You know, the boring kind of bills that you've been paying forever — utilities, groceries, healthcare. Balancing these with the occasional splurge is a whole new challenge in retirement.

Then there's the sneaky phenomenon known as "lifestyle creep." Basically, it's the tendency to keep spending like you did when you were working even though you’re now living on a fixed income. This happens largely because our spending habits don't magically change when we retire. If anything, they can become even more ingrained, leading to potential financial strain.

The best way to avoid that financial strain? Like most things in retirement, it’s not just about squirreling away money; it's about savvy planning and understanding your future financial needs.

Knowing the biggest expenses for retirees can help you plan for them and ensure your golden years are comfortable and worry-free (and that you have plenty left in your budget for those green fees). Looking at the most recent Bureau of Labor Statistics (BLS) data, let's dive into the five largest expenses retirees encounter and explore strategies to manage and reduce these costs. (LINK BLS 2022 DATA

1) Housing ($20,632 Annually/$1,719 Monthly)

Ah, the dream of retiring and waving goodbye to hefty housing expenses. Unfortunately, that's not usually the case. In fact, in 2022, a significant chunk of retirees’ budgets — over 35% of annual expenditures — went toward housing (which includes mortgage or rent payments, property taxes, insurance, and maintenance costs).

If you always assumed you’d own your house free and clear before retiring, it may surprise you to learn that a recent study from Harvard’s Joint Center for Housing Studies found that more than 40% of homeowners aged 65-79 still carry a mortgage. The same study found 31% of people 80+ are still paying off their mortgage.

If you want to free up space in your fixed retirement budget, paying off your mortgage can make a major difference. It is easily the largest single expense for most retirees. (Although you’ll still have to pay taxes, insurance, and maintenance costs.)

If you have the time and financial bandwidth to do so, you may want to consider paying off your mortgage before retiring. This can free up a substantial amount of your income and build equity. Downsizing is another great option. Moving to a smaller, more manageable home or relocating to a cheaper area can cut your housing expenses dramatically.

Renting can also be more cost-effective than owning, especially when you factor in maintenance and property taxes. If you plan to stay in your current home, budget for increased maintenance costs as you age, as you may need to outsource certain tasks — lawn care, gutter cleaning, and home repairs — to professionals.

If you’re retired (or about to be) and you’re considering a move, it’s almost always worth the time to meet with a professional financial advisor to see how a home sale will affect your tax and income status.

2) Transportation ($8,172 Annually/$681 Monthly)

No more commuting means no more big transportation expenses, right? Since you’ve already seen the title of this next big expense, you already know that’s not correct.

Transportation is the second major expense for retirees, running an average of $8,172 annually ($681 monthly) in 2022. This category includes vehicle purchases, maintenance, insurance, fuel, and public transportation costs.

With the rising costs of vehicles and fuel, managing transportation expenses is essential. In 2022, retiree households saw a 14% increase in transportation costs. According to Kelley Blue Book, the average price of a new vehicle rose by 4.9% due to supply chain issues. Furthermore, gas prices surged to an average of $4.67 per gallon, up from $3.19 in 2021. While those prices have since cooled off, it’s safe to assume we’ll have more ups and downs over the next 30 years.

One strategy to reduce these costs is to become a one-vehicle household. This can save you money on insurance, maintenance, and fuel. Additionally, regularly comparing auto insurance rates can help ensure you're getting the best deal.

For those who don't need a car daily, services like Uber or Lyft can be more economical than owning a vehicle. Public transportation is another fantastic option if it’s available in your area. In fact, when choosing where to retire, you may want to consider the availability of public transportation and the walkability of the area to reduce dependence on a personal vehicle.

3) Healthcare ($7,540 annually/$628 monthly)

Healthcare expenses are a significant concern for retirees, averaging $7,540 annually or $628 monthly in 2022. This category includes health insurance, medical services, supplies, and prescription drugs. With healthcare costs on the rise, understanding and planning for these expenses is key.

Health insurance premiums make up a large part of these costs. In 2022, healthcare expenses for retirees increased by over 7%, and they’re projected to climb about 5% annually over the next 30 years, roughly twice the rate of other expenses.

To manage healthcare costs, it's important to understand Medicare thoroughly. Knowing what's covered by each part — and what’s not — can help you avoid surprises. If you’re eligible, a Health Savings Account (HSA) can also help cover healthcare costs in retirement. Long-term care insurance is another consideration. It covers services Medicare doesn’t, like extended home care or nursing home stays.

Preventive care is also essential. Regular exercise and healthy eating can reduce the likelihood of costly medical conditions, as can regular visits to your doctor. Investing in your health now can help you avoid major medical costs in the years to come, so consider allocating part of your budget to gym memberships, personal trainers, or home exercise equipment to maintain health and prevent chronic conditions.

4) Food ($7,306 annually/$609 monthly)

Man cannot live on bread alone, even when he’s retired. Nor should he!

Before I go on, I want to pause to say that I am not here to steal the joy from your retirement. Maybe you’re like me and picture yourself enjoying nice leisurely dinners out with your spouse (you have the time!)… or devoting yourself to the art of sourdough (you have the time!). Retirement is about living, not merely surviving.

Like all things in retirement, managing your nest egg is about balancing what you have and what you want. If you don’t get a lot of enjoyment from cooking or dining out (and that’s not how you socialize), then this could be an easy part of your budget to rein in. If your picture of retirement includes savoring a nice Paso Robles with friends on your patio, consider allocating a larger slice of the pie toward food costs. Either way, the most important thing is that you make a plan so that you can manage your budget effectively.

That said, food is a significant expense, with retirees spending an average of $7,306 annually ($609 monthly) on groceries and dining out in 2022. (For anyone curious, the split is 66% groceries, 34% dining out.) To reduce food costs, you can consider buying certain non-perishable items in bulk. Memberships at stores like Costco or Sam's Club can lead to significant savings — although be sure to factor the membership fee into your budget. Using coupons and taking advantage of senior discounts at grocery stores and restaurants can also help lower expenses.

Planning your meals can reduce impulsive purchases and food waste. Sticking to a meal plan helps you buy only what you need. Cooking more meals at home instead of dining out not only saves money but can promote healthier eating habits — two birds, one stone!

5) Utilities ($4,236 annually/$353 monthly)

Utilities, which include bills for gas, electricity, water, phone, and internet, represent the fifth-largest expense for retirees, averaging $4,236 annually or $353 monthly in 2022.

To reduce these expenses, focus on energy efficiency. Install programmable thermostats, use LED bulbs, and replace inefficient appliances to cut down on energy consumption. Sealing air leaks around doors and windows can improve home insulation, reducing heating and cooling costs. Some of these changes may even qualify for the Energy Efficient Home Improvement Credit. (LINK:

Downsizing to a smaller home can significantly cut utility bills. Smaller homes require less energy for heating and cooling. Additionally, consider installing solar panels with batteries to reduce electricity bills and become more energy-independent.

Remember, the key is to make a plan that reflects your budget, needs, and wants and then stick to the plan. Your retirement expenses may look very different from what your neighbors spend. Someone living on their own and spending evenings dining out with friends is likely going to have a completely different set of priorities — and budget — than a couple wanting to stay in their family home so their multiple children and grandchildren can visit frequently.

Retirement brings both freedom and financial responsibility. By understanding and planning for the biggest expenses — housing, transportation, healthcare, food, and utilities — retirees can better manage their finances and enjoy a comfortable and fulfilling retirement.