How Much Will it Cost You to Live in Retirement?

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Without a deep understanding of what it costs you to live, any discussion of retirement savings or income is pointless. Despite the oft-repeated advice that you will spend some standard percent (perhaps 60% on the low end to 100% or more on the high end) of your pre-retirement income in retirement, what it costs you to live is generally not a function of how much you make! There are millionaires who live like college students, and minimum-wage workers who live like millionaires — for a while — on credit. You’re probably somewhere in between. But do you really know? To get serious about retirement planning, you simply must have an accurate picture of the range of your monthly living expenses. You should understand your bare minimum or fixed expenses, your average expenses, and your ideal expenses — allowing for some luxuries.

The only truly accurate way to determine expenses, is to actually keep track of all your expenses for at least a year, while you are living a retirement-like lifestyle, but before actually retiring. Over the long haul, this is one of the most important few actions you can take to build wealth and retire comfortably! You can track expenses with a desktop tool such as Quicken or an online tool such as But it’s still hard, and requires more discipline and attention to detail than many can muster.

Below I’ll offer a baseline number that you can adjust up or down for your situation. But you’ll need more accuracy to be confident. How do you get that if you aren’t the detail type? One approach is to sit down with a good set of budget categories, plus your checking account and credit card statements, and try to estimate a monthly or annual amount for each category. Don’t forget those less-frequent expenses such as home and auto repairs, vacations, and property taxes!

As a baseline, consider the living expenses of two real-life couples in their 50’s, no children at home, living on opposite sides of the country. Both have what I would call a “restrained upper-middle-class lifestyle.” Think smaller houses in upscale neighborhoods, gas-efficient vehicles, few big toys or fancy clothes, careful diets, but plenty of frugal fun: road trips, coffee bars, dining out, books and movies. In both cases, minimum monthly expenses sans mortgage (this assumes your house is paid for), come in at a bit over $4,000/month, or $48,000/year.

If you need more confirmation on the cost of a comfortable lifestyle, consider these data points: In his ground-breaking book Work Less, Live More on early retirement, Bob Clyatt writes that “average budgets for generally well-heeled early-retired couples are around $40,000 to $45,000 [a year]” — about $3,750/month on the high end. And, according to — a web site created by a former banker using aggregated spending transactions to find out how people handle their money — the average expenses (again not including mortgage or rent) for higher-income ($125K+) couples age 50-65, no kids, are about $4,675/month or about $56,000/year.

If your lifestyle sounds different from these, you can scale up or down as needed. For example, if you’re willing to live in more modest surroundings, buy used, and eat lower on the food chain, you can probably live on quite a bit less. For example, changing the income to $40-$50K at yields a budget of just $2,258/month. On the other hand, if manicured retirement communities, expensive vehicles, and international travel are your idea of retirement living, you could need quite a bit more.

Even more important for a secure retirement than your savings “number,” is your expense number. What is yours? How much will it cost you to live each month in retirement?

(For a couple of quick ideas on reducing expenses, see Wish Lists and Dining Cash.)


  1. Hi Darrow

    Thanks for the e-book.

    Question: when you talk about estimating retirement expenses, how do you allow for inflation? If you go with the typical equities/bonds/cash allocation it seems to me that the bonds/cash part is going to get eroded by inflation over time and unless you have a very large allocation to equities, any growth on equities is unlikely to be enough to protect the entire value of the portfolio over any length of time. Am I missing anything?


  2. Darrow Kirkpatrick says

    Thanks for the comment traineeinvestor. A short answer to your question is that most of the academic studies on portfolio survival incorporate historical inflation rates into their models. So when they recommend a "safe withdrawal rate" (typically about 4% for asset allocations around 50-60% stocks), that rate assumes you will be making inflation adjustments in your annual withdrawals. (There are ongoing questions about whether the 4% rate is still viable, but that's a topic for another post.)

    Other thoughts: in general, only cash is going to lose out to inflation. Bonds generally do beat inflation, providing a real return of a few percent over inflation, depending on the type of bond. Equities can do even better, of course. So a balanced portfolio should beat inflation over the long haul. That said, all of these statistics are based on the past, and there is no guarantee the future will be the same! It is best to own some of the actual goods and services that are inflating, and the market is one way to do that.

  3. Ultra-Conservative says

    I consider myself really fortunate. I am 50-years old, have held down a great job for the past 20+ years (yes, even during the entire "Great Recession"), have a luxury 2-bedroom, 2-bathroom condo paid in full, a brand-new 2010 Honda Civic Hybrid paid in full, along with all my credit cards paid in full.

    As for my nest egg, I have $320K stashed in my 401(K), and although the ROI is relatively low, I have 100% of my balance wrapped up in a Standish Mellon Stable Value Fund. I have seen too many of my co-workers lose almost have their value during the 2008-to-2009 Recession and I do not have the stomach for that kind of risk. Also, I have an additional $232K wrapped up in CD accounts. One CD is earning 5.12% with an APY of 5.25%, if you can believe that. I opened this CD in August 2008, just before the Federal Reserve put the interest rates on the chopping block. However, the CD is due to mature in August 2013, so we'll see what happens afterwards. My other CD only earns 2.96% with an APY of 3.00% and does not mature until February 2016.

    Bottom line – There are plenty of safe and secure investments. You just need to know what and whom to ask. When my 5.12% CD matures in August 2013, assuming interest rates are where they are at today, I may look at opening either a Fixed-Income Annuity or quite possibly, I may venture into another investment tool known as the Fixed-Indexed Annuity. Either way, I have found from past experience, I just cannot stomach the stock market. I lost a great deal of money from my 401(K) at my first job back in the late 1980's / early 1990's and I am unwilling to go down that road again. Now, I have over $550K in both taxable and tax-deferred accounts and I think I am doing pretty well.

  4. Darrow Kirkpatrick says

    Thanks for the detailed contribution, Ultra-Conservative. And congratulations on the financial security you've built. You're obviously doing a lot of things right. Most importantly, you understand your own investing temperament, and have learned how to build wealth within a conservative framework. My advice, in general, is to take on a bit more risk, but that is of no use if somebody can't stay invested through the volatility. Thanks again — and kudos for locking in those high interest rates, a fond memory at this point!

  5. Hi,
    I read an article on yesterday that included you and I'm instantly addicted to your site!

    I'm 40. Like you, I'll probably retire at 50. My understanding is that the 4% withdrawal rule applies to people who retire at "normal" retirement age of around 62-65. What's the withdrawal rule for 50 year olds?


  6. Darrow Kirkpatrick says

    Thanks for dropping by Jason! Most of the studies that have produced the 4% rule have indeed focused on typical 30-year retirements. Given advancements in health care, and for those of us who retire early, those studies may not be realistic. The fundamental relationship is that the longer you must rely on your assets, the lower should be your withdrawal rate. Given the current economic environment, and the potential for very long retirements, many are recommending less than 4%, or living on inflation-adjusted income alone and not touching principal. Is there an exact answer? I doubt it. But I'm working here to produce information and tools that will help us all understand the equation better. So stay tuned…

  7. Darrow,

    Where did the data for the two "baseline" couples living on $48000 per year come, and
    does that include health care? Are they post 65 or under 65?

  8. Darrow Kirkpatrick says

    Hi Steve, thanks for the question. The two couples are personal contacts who track their expenses closely. The numbers do include healthcare. Be advised neither had to purchase new individual health plans — both had some form of pre-existing or group coverage. Both couples under 65.

  9. Hi,
    Thanks for providing the information on a typical couple's expenses in retirement. Do you have similar information for a single person?

  10. Darrow Kirkpatrick says

    Thanks Maureen. The Bureau of Labor Statistics does have statistics for singles. Check out their "Composition of consumer unit" table, for example.

    Beyond that, I definitely recommend that everybody track their own expenses for a period of time. Everyone is unique, different from the averages. And tracking your own expenses will naturally show you areas to save money too.

  11. interesting to see "average budgets for generally well-heeled early-retired couples are around $40,000 to $45,000 [a year]" – I've tracked my spending for years, and more recently have been doing more calculations towards prospective retirement, and I estimate my actual spend to be in the vicinity of $17kpa excluding overseas travel twice a year, $24kpa including – if I add my partner (typically 50%) that would become say $25-36kpa

    So yes I may near the bottom of that range – but I feel that simply by cutting overseas travel we could come in closer to $25kpa (home is paid off, and I rarely drive but have included $3kpa I pay to run an old car)

  12. Darrow Kirkpatrick says

    Thanks Frank. It's good to know there are many opportunities for people to reduce their retirement living expenses well below the average!

  13. Jenna, Adaptu Community Manager says

    Love this blog post.

  14. Darrow Kirkpatrick says

    Thanks Jenna. Knowing your living expenses is one of the first steps to figuring out retirement.