9 Ways Spending Changes in Retirement
Some retirees end up spending more after they leave the workforce
Retirees don't have to pay for professional work clothes, dry cleaning, or transportation to the office. So some workers reason that they will be able to get by with a lower income when they retire. But spending on basic necessities typically increases in retirement. The budget for food, housing, and healthcare is larger for retirees at every income level, according to research by
Seeing it all.
When you're at your desk five or more days a week, you can't always get away to the
More dining at home.
Retirees spent about 9 percent of their budget on food eaten at home in 2008, according to the most recent
Higher housing costs.
Seniors actually spend a greater share of their budget on overall housing costs than working Americans. Although many retirees have finished paying off their mortgage, they still face property taxes and devote a bigger share of their income to home maintenance and repairs than those who are still working. "People forget to budget for what it costs to maintain their home and home improvements," says
Soaring healthcare costs.
Workers who retire before age 65 must pay their own health insurance premiums, unless a former employer picks up the tab. Retirees spent almost three times as much of their income on healthcare as workers. Seniors generally spent more on health insurance, medical services, drugs, and medical supplies. And even after qualifying for
Fewer clothing expenses.
When retirees no longer have to dress for success, it's easy for them to slash their clothing budget. "You no longer have to pay for dry cleaning or dress up," says Sharpe. People who have left the workforce spend just 3 percent of their annual budget on clothing, compared with 4 percent for workers.
Lower transportation costs.
Giving up your commute saves time, aggravation, and money. Retirees purchased fewer cars and spent less on gasoline and motor oil than workers did in 2008. But seniors also spent slightly more on vehicle maintenance, repairs, and insurance--perhaps because they hold on to their cars longer. Retirees also increasingly rely on public transportation as they age.
With eight or more free hours in the day, retirees have plenty of time for hobbies. But retiree spending on entertainment remained the same as that of working Americans in 2008--both amounting to about 6 percent of all spending. Set up plans for volunteer work, list projects that need to be completed around the house, and renew your public library card before you retire to avoid cultivating expensive entertainment tastes.
Giving to grandchildren.
When grandchildren appear on the scene, their chubby cheeks and gentle coos are often budget breakers. "Retirees give their grandchildren clothing and gifts at all the major holidays and take more trips to see them," says Williams. Include money for gifts and a plan for bequests in your retirement budget.
Workers, of course, spend some of their income saving for retirement. About 13 percent of employee spending went to pension,
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9 Ways Spending Changes in Retirement | Retire Smart
(c) 2009 U.S. News & World Report