Retirement Spending Plan: What Will You Actually Spend Each Month?

Most retirement calculators start with "how much can I withdraw?" The more useful starting point is: "what will I actually spend?" This guide walks through what retirees actually spend, how that changes over time, and a cash flow calculator that tells you whether your income sources close the gap — and at what portfolio withdrawal rate.

What retirees actually spend

Before building your own plan, it helps to know the benchmarks. The Bureau of Labor Statistics tracks spending by age group in its Consumer Expenditure Survey. The most recent comprehensive data shows average annual household expenditures by age:¹

Source: BLS Consumer Expenditure Survey 2022. These are mean household expenditures; many retirees spend significantly above or below these figures depending on housing costs, lifestyle, and geography.

Three observations stand out from this data. First, spending drops meaningfully with age — 75+ households spend about 21% less than 65-74 households, not because of cutbacks but because life naturally becomes quieter. Second, housing dominates across all age groups, which is why paying off your mortgage before retirement changes the math dramatically. Third, healthcare's share grows: it's about 13% of spending for 65-74 and 16% for 75+, even with Medicare coverage.

The retirement spending curve

A common assumption is that retirement spending grows with inflation — you need the same dollar amount each year, just adjusted upward. Research by David Blanchett of Morningstar tells a different story.² Real (inflation-adjusted) spending actually tends to decline in most retirement periods, for three reasons:

Phase 1: Go-go years (roughly ages 62–75)

Early retirement tends to be active. Travel, hobbies, bucket-list experiences, home projects, helping adult children. Spending is often higher than working years, especially for those who retired with a specific lifestyle in mind. This is the most expensive phase.

Phase 2: Slow-go years (roughly ages 75–85)

Activity levels moderate. Travel becomes less frequent or less expensive. Big home projects are done. The pace slows and spending typically drops — in real terms — by 1-2% per year over this phase. Day-to-day expenses remain steady, but the discretionary categories shrink.

Phase 3: No-go years (roughly ages 85+)

Activity is limited but healthcare costs can rise sharply — especially if long-term care is needed. The "retirement smile" shows spending picking back up in this phase, though much of the increase is healthcare-specific. For those without long-term care insurance or a plan, this is where retirement finances most often break down.

The practical implication: a $90,000/year budget at 65 might naturally drift to $75,000 in real terms by 80 — which is good news for portfolio sustainability — but then spike if significant care is needed at 88. Planning around average spending hides the variance that actually matters.

What expenses drop in retirement

Many pre-retirement expenses disappear or shrink substantially when you stop working:

• FICA taxes: You no longer pay Social Security and Medicare payroll taxes (12.4% Social Security + 2.9% Medicare on wages). On a $120,000 salary, that's $18,396/year you simply stop paying.
• Retirement contributions: Maxing out a 401(k) ($24,500 in 2026, $32,500 at 50+) and IRA ($7,500/$8,600 at 50+) stops. This can free up $30,000–40,000/year of formerly "spent" income.
• Work-related costs: Commuting, professional clothing, work lunches, professional development. Typically $5,000–$15,000/year depending on your commute and industry.
• Mortgage: If you retire mortgage-free, you eliminate your largest expense. A paid-off home worth $600,000 removes what might be $2,500–$4,000/month in principal, interest, and PMI.
• Children's expenses: College tuitions, supporting adult children, family vacations. If your children are independent by retirement, this category may disappear entirely.
• Life insurance premiums: If you no longer need income replacement for a working spouse, term policies can be dropped.

What expenses rise in retirement

Not all expenses fall. Some categories grow predictably:

• Healthcare: Even with Medicare, out-of-pocket costs are significant — premiums (Part B $202.90/month in 2026 × 2 for a couple = $4,870/year), Medigap or Medicare Advantage premiums, dental, vision, and prescription costs. The average 65-year-old couple needs roughly $315,000 to cover healthcare costs through retirement, per Fidelity's 2024 estimate.
• Travel: Early retirement often brings significant travel spending, particularly in the first 5-10 years when health and mobility are high.
• Home maintenance: Older homes need more attention. A commonly cited rule of thumb is 1-2% of home value per year for maintenance and repairs.
• Leisure and hobbies: Golf memberships, club dues, hobby equipment, grandchildren's activities — many retirees spend more on leisure than they expected.
• Taxes (potentially): RMDs at 73 (or 75 for those born 1960+) can push income significantly, triggering higher Medicare IRMAA surcharges, more Social Security taxation, and potentially pushing into higher brackets. See our retirement income tax calculator for a full picture.

Building your spending plan: a practical approach

The most reliable way to estimate retirement spending is to start from your current spending and adjust by category, rather than applying a blanket percentage.

Step 1: Track current spending for 3 months

Most people underestimate their spending by 15-20%. Pull 3 months of bank and credit card statements and categorize them. This is your baseline. Retirement planning based on a guess at current spending is planning on sand.

Step 2: Apply the retirement adjustments

Go line by line and mark each category as: drops, stays, rises, or disappears. The sum of these adjusted categories gives you your year-1 retirement spending estimate.

Step 3: Build three scenarios

Build a lean budget (what if we cut everything discretionary), a comfortable budget (realistic current lifestyle), and a lifestyle budget (what we actually want to do in retirement). These bound the range and help you understand what choices matter most.

Step 4: Run the cash flow math

Use the calculator above to see which income sources cover which expenses, what gap remains, and what portfolio withdrawal rate that gap requires. Connect the withdrawal rate to our safe withdrawal rate calculator to assess sustainability.

How spending connects to tax planning

Your spending level doesn't just determine how much you need — it determines from which accounts you should withdraw. The key interaction points:

• Roth conversion window: If your spending is low and covered mostly by Social Security and a small portfolio draw, your taxable income may be well below the 12% bracket ceiling ($100,800 for married filing jointly in 2026 taxable income). That gap is available for low-cost Roth conversions that reduce future RMDs. See Roth conversions in retirement for the math.
• 0% capital gains: If your income is below $98,900 (MFJ) or $49,450 (single) in 2026, your long-term capital gains are taxed at 0%. Retirees in the early retirement phase with low distributions can harvest gains at zero federal tax cost. See capital gains tax in retirement.
• IRMAA: Portfolio withdrawals from traditional IRAs count as MAGI and can push you into higher Medicare premium tiers. If your spending requires large IRA draws, account for the IRMAA cost. The first tier triggers at $218,000 MAGI (MFJ) in 2026.
• Social Security taxation: If combined income (AGI + tax-exempt interest + 50% of SS) exceeds $32,000 (MFJ), up to 50% of your Social Security becomes taxable; above $44,000, up to 85%. Spending more from Roth or taxable accounts instead of IRAs can keep combined income below these thresholds. See Social Security tax calculator.

One-time expenses and lumpy spending

Monthly budgets implicitly assume smooth spending, but retirement often includes large one-time costs that blow up the average:

• Home renovations: Remodeling a kitchen, adding an accessible bathroom, or major repairs can cost $30,000–$150,000 and happen once or twice in retirement.
• New vehicles: Two cars over 25 years, replaced every 8-10 years, means 5-6 vehicle purchases. At $40,000–$60,000 per purchase, that's $200,000–$360,000 in vehicle spending alone.
• Travel bucket list: A once-in-a-lifetime trip or cruise can cost $15,000–$40,000. If you have 10 trips planned, that's $150,000–$400,000 in travel spending outside the monthly average.
• Helping adult children: A down-payment gift, wedding contribution, or emergency support can run $25,000–$100,000 per child.
• Long-term care: If needed (70% of 65-year-olds will need some care), the cost can run $5,700/month for assisted living or $9,277–$10,646/month for a nursing home in 2026. Even two years of care exceeds $200,000. See long-term care planning for strategies to fund this.

A practical approach: add an annual "lump sum reserve" of 3-5% of your annual budget to cover irregular large expenses. Over 20 years, that reserve funds several car purchases, a few big trips, and a home improvement or two.

When to revisit your spending plan

A retirement spending plan isn't a one-time exercise. Revisit it:

• Annually: Compare actual vs. planned spending. Adjust next year's plan for categories that ran higher or lower than expected.
• At major life events: Death of a spouse (spending patterns change dramatically), health diagnosis, moving, helping a family member financially, or a significant market event that changes your portfolio value.
• At Social Security filing: When SS starts (whether at 62, 67, or 70), your guaranteed income changes significantly and the required portfolio withdrawal rate drops.
• At RMD age (73 or 75): Required minimum distributions will force portfolio withdrawals regardless of spending need. If your RMDs exceed your spending gap, you'll need a plan for the excess — Roth conversions, QCDs, reinvestment in taxable accounts. See RMD calculator.