Retirement Expenses

 I'm trying to give you some perspective of what you might face in retirement expenses versus income.

Never expected that in retirement that my largest expense would be insurance. About $13,600 a year for house, car, umbrella (in case you get sued for millions of dollars such as in a car accident), Medicare, Medicare Supplemental, Medicare prescriptions, and Dental. Despite all that insurance, out of pocket medical expenses still totaled over $7,000 despite all that insurance coverage (over $4,200 for prescriptions and non-prescription medications, $1,600 for doctors, and over $1,100 for dental). Fortunately, our house is paid off so we don't have a mortgage expense though property tax adds over $6,400 a year (would be more, but frozen for 10 years due to our age in our residence county - may not be frozen where you live or if you buy another house after you've been retired a while). The other two large expenses were Utilities (electricity, heat, air conditioning, and water) and Groceries - both over $9,000 a year. Leaving out over $11,000 for restaurants as that is more of a controllable than the others. We are fortunate enough to have enough savings to afford our expenses, but so many retired people have little or no savings. Shows the importance of saving for retirement starting at a young age.

Those out of pocket expenses total $45,000 (over $56,000 when restaurant meals are included) and there are many day to day expenses not included in those numbers that total over $20,000 (some optional such as lawn and maid service; others less optional such as phone, TV, internet, repairs, major purchases, clothes, etc.). We did no vacations due to Covid the last 3 years, but normally that has been the most expensive optional expense as we used to do 3 to 4 vacations a year. Our expenses in retirement have been more than when we were working due to the optional, frequent vacations we took in retirement.

This is why I preach about the importance of saving for retirement, plus give you an idea of what you will likely face in expenses relative to income when retired (though both would be higher then due to normal inflation, but the relationship between them likely will be similar). Now we do receive over $50,000 a year combined in Social Security income ((2/3rds me; 1/3rd my wife in SS income) because most of my career I paid out the maximum in Social Security taxes . Most married couples don't pay out in SS taxes and therefore don't receive that much in SS benefits. Singles receive SS income (and pay out SS taxes) much less. 

Also keep in mind, that when one spouse dies in retirement, the surviving spouse loses the lower monthly Social Security check. That can reduce SS retirement income by 33 to 50% (50% when both spouses paid the maximum SS taxes when working and thus each received the maximum SS benefit in retirement), but your monthly expenses won't go down anywhere near that amount (will mostly remain the same).