For Retirees, Housing And Health Care Are The Two Biggest Expenses.

The typical American over 65 spends close to $50,000 annually on living expenditures.

What workers may expect to spend on regular costs once they stop working is one of the most important questions people ask when attempting to determine how much to save for retirement.

Pre-retirees can anticipate that prices would rise for almost everything by the time they retire, from housing costs to medical expenditures, but it’s hard to predict just how much. According to data gathered by Annuity.org, the average American over 65 spent $47,579 yearly on living expenditures in 2020.

Retirement income is largely made up of housing costs, which retirees on average spend more than $17,000 on annually. Compared to 76% of renters, 36% of older homeowners spent at least one-third of their income on housing in 2019. Housing expenditures will need to be taken into consideration throughout the planning stage because, according to an AARP research, more than 75% of respondents said they wanted to stay in their existing community and house for as long as possible.

Another significant portion of retirement spending goes toward health care costs. While expenditure as a whole tends to decline after retirement, retirees logically spend more than their working counterparts on health care and health insurance. In 2020, the average cost of health care was:

• $6,668 for retirees, and
• $4,762 for working Americans

Pre-retirees are increasingly taking issues into their own hands to support themselves in retirement. One-third of Baby Boomers rely on Social Security as their primary source of income, compared to more than 80% of working Americans who want to save for their retirement primarily on their own. 73% of non-retirees fear they won’t be eligible for Social Security benefits when they retire.

But according to the gathered data, 22% of Americans have less than $5,000 saved for retirement, and 15% have no retirement savings at all. The good news is that it seems like younger Americans are becoming more committed to saving for retirement. Gen Z is saving more for retirement than millennials were at the same age. At the same age, only 11.4% of millennials had a 401(k) with an average balance of $2,000, compared to nearly 16% of Gen Z who engage in one with an average balance of $4,500. The average balance of Gen Z savers who have participated in a defined contribution plan for five years is over $23,900.

Source: https://www.benefitspro.com/2022/08/12/housing-health-care-top-list-of-expenses-for-retirees/