Average Retirement Spending

Retirement is a significant life milestone that requires careful financial planning. One key aspect of this planning is understanding the average retirement spending and how it might impact your financial situation. According to the Bureau of Labor Statistics (BLS), the average income of individuals aged 65 and older in 2021 was $55,335, while their average expenses amounted to $52,141 annually, or approximately $4,345 per month. These figures provide valuable insights into the financial realities of retirement.

Age-Based Spending Trends

The BLS data also reveals interesting trends in retirement spending based on age groups. Younger retirees, between the ages of 65 and 74, had higher average expenses, totaling $4,870 per month. In contrast, older retirees, aged 75 and above, had lower average expenses, amounting to $3,813 per month. These variations highlight the importance of considering age when planning for retirement and adjusting your financial strategy accordingly.

The 80% Rule

To estimate how much money you'll need in retirement, many financial experts suggest using the 80% rule. This rule assumes that retirees will need around 80% of their pre-retirement income to cover their expenses in retirement. This percentage takes into account that some expenses, such as commuting costs or saving for retirement, may decrease, while others, like healthcare or leisure activities, may increase.

Applying the 80% Rule

Let's illustrate this with an example. Suppose your current household income is $80,000 per year. According to the 80% rule, you should plan on needing at least $64,000 per year in retirement. This estimation provides a baseline for your retirement planning and can help you set realistic financial goals for your future.

Understanding average retirement spending is crucial for effective retirement planning. By considering factors such as age-based spending trends and using tools like the 80% rule, you can better prepare for a financially secure retirement. Consulting with a financial advisor can also provide personalized insights and guidance to help you navigate this important life stage with confidence.

Best regards,

Sharon Ben-David

Your Safe Money Lady™

Protecting Your Nest Egg, Inc.

Phone: (954) 261-5200

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