How Much Money People Spend in Retirement

Social Security has just released a detailed look at consumer spending in 2020 by people aged 55 and older. As with much of Social Security, it’s all about the numbers, and there are lots of them here. But for anyone paying close attention to their income and spending records – aka retirees – it’s helpful to see how you compare with others of similar age and income levels.

Spending patterns change a lot as people and households get older, but the common direction is that people spend less as they age – except on health care. This likely is due to income reductions but also to reductions in activities that use discretionary income – travel, restaurant meals, entertainment, and the like.

Seeing these trends and, especially, their implications for changed spending behavior, can be helpful. Having time to make needed adjustments is nice, too.

The report looks at spending by age, income level, household, and individuals. Here’s a snapshot of household size by age grouping:

Size/Age                                  55-64               65-74               75+

1 person                                   31.4                 37.2                 54.2

2 people                                   40.4                 49.0                 37.7

3 or more people                     28.2                 13.9                   8.2

Pick the unit size closest to your situation. If you live with one or more other people, either a partner or friends, spending figures by household size may be more meaningful than individual spending levels.

Likewise, annual household incomes are broken into quartiles — $19,871 or less, $19,872 to $35,794,  $35,795 to $65,000, and more than $65,000. The report calls these groups lowest, low-middle, high-middle, and highest. It provides percentile figures and also the average and median spending totals. These last two categories are needed because the lopsided growth of high-income households in recent years has rendered some averages of little meaning, and made midpoint averages more relevant.

Here were the spending averages of these households:

Quartile                     Lowest            Low-Middle                High-Middle               Highest

Average (“mean”)       $26,160           $36,658                       $47,631                       $78,473

Midpoint (“median)    $19,116           $28,660                       $37,515                       $59,500

25th Percentile             $13,712           $21,028                       $28,692                       $43,456

75th Percentile             $28,788           $39,100                       $ 50,906                      $85,053

Again, pick the group most like you, and compare your spending to it.

Here’s the same breakdown by individuals as opposed to households. If you live alone, this is the measure you should track.

Quartile                     Lowest            Low-Middle                High-Middle               Highest

Average (“mean”)       $22,105           $27,152                       $28,092                       $41,941

Midpoint (“median)    $16,380           $20,656                       $21,374                       $30,942

25th Percentile             $11,796           $14,436                       $14,666                       $19,784

75th Percentile             $23,540           $30,565                       $31,696                       $47,712

Once your eyes are no longer glazed over by all these numbers, here is a look are household spending sliced into age groups:

 Age                                           55-64               65-74               75+                  65+

Average (“mean”)                   $64,048           $52,245           $40,716           $47,457

Midpoint (“median)                $46,636           $37,384           $30,124           $34,088

25th Percentile                         $29,071           $24,684           $19,396           $22,032

75th Percentile                         $74,345           $57,732           $46,636           $53,172