The Biggest Expenses in Retirement (and How to Plan for Them) (2026)
The five biggest expenses in retirement are housing, healthcare, food, transportation, and taxes — in that order for most Americans. But what surprises most retirees isn't the categories themselves, it's the amounts. Healthcare consistently runs 50–100% higher than people budget. Long-term care — which most people don't budget for at all — can wipe out decades of savings in a few years. And taxes on traditional retirement account withdrawals often add $5,000–$15,000/year that people didn't account for.
Here's what each category actually costs in 2026, what drives the variation, and how to plan for it before it surprises you.
How Retirees Actually Spend Their Money
According to the Bureau of Labor Statistics Consumer Expenditure Survey, Americans 65 and older spend their money in roughly this distribution:
| Expense category | % of spending | Average annual amount (65+) |
|---|---|---|
| Housing | 33% | $19,000 |
| Transportation | 14% | $8,100 |
| Food | 12% | $7,000 |
| Healthcare | 12% | $7,000 |
| Personal insurance and pensions | 10% | $5,800 |
| Entertainment | 5% | $2,900 |
| Cash contributions (charity, gifts) | 5% | $2,900 |
| Apparel | 3% | $1,700 |
| Other | 6% | $3,500 |
| Total average spending | 100% | ~$57,900 |
Source: Bureau of Labor Statistics Consumer Expenditure Survey, 2022 (most recent available). All figures are averages — individual results vary substantially.
These are averages across all households 65+, including both modest and affluent retirees. Your actual distribution will differ based on whether you own or rent, your health status, your lifestyle, and where you live. Use these as a baseline for comparison, not a prescription.
Build your personalized expense plan: Use our free retirement budget calculator to map your specific costs against your income sources.
#1: Housing — The Largest Single Expense
Housing accounts for approximately one-third of the average retiree's spending — and it's the category with the widest variation. The difference between a paid-off home in rural Alabama and a rental apartment in San Francisco is $1,000 vs. $4,000+/month in housing costs alone.
What housing actually costs retirees in 2026
If you own your home with no mortgage:
| Cost | Monthly estimate | Annual estimate |
|---|---|---|
| Property taxes | $250–$700 | $3,000–$8,400 |
| Homeowners insurance | $100–$200 | $1,200–$2,400 |
| HOA fees | $0–$500 | $0–$6,000 |
| Maintenance and repairs | $250–$700 | $3,000–$8,400 |
| Utilities | $200–$400 | $2,400–$4,800 |
| Total (no mortgage) | $800–$2,500 | $9,600–$30,000 |
If you still have a mortgage: Add $800–$2,500/month in principal and interest payments on top of the above — depending on your remaining balance, rate, and term.
If you rent: Rent ranges from $700/month (rural South) to $4,000+/month (major metros). National median rent for a two-bedroom apartment is approximately $1,500/month in 2026.
The maintenance reality
The most chronically underestimated housing cost is maintenance. Financial planners commonly recommend budgeting 1–2% of your home's value per year for maintenance and repairs.
| Home value | 1% annual maintenance budget | 2% annual maintenance budget |
|---|---|---|
| $250,000 | $2,500/year ($208/month) | $5,000/year ($417/month) |
| $400,000 | $4,000/year ($333/month) | $8,000/year ($667/month) |
| $600,000 | $6,000/year ($500/month) | $12,000/year ($1,000/month) |
These aren't every-year costs — but a roof replacement ($15,000–$25,000), HVAC system ($6,000–$12,000), or foundation repair ($5,000–$30,000) arrives eventually. Budget proactively or face a financial crisis when it does.
How to reduce housing costs in retirement
Pay off the mortgage before retiring. Eliminating a $1,500–$2,500/month mortgage payment is the single most effective way to reduce fixed retirement expenses. Even accelerating payoff by 3–5 years through extra principal payments can save significantly.
Downsize strategically. Moving from a larger home to a smaller one — or to a lower cost-of-living area — can simultaneously reduce property taxes, maintenance costs, insurance, and utilities while freeing up equity. A $150,000 equity gain from downsizing, invested at 4%, generates $6,000/year in additional income.
Consider geographic relocation. States with no income tax, low property taxes, and lower overall cost of living can reduce total housing costs by 20–40% compared to high-cost states. See: best states to retire for taxes.
Look into senior property tax relief programs. Most states offer homestead exemptions, assessment freezes, or circuit breaker credits that reduce property taxes for seniors 65+. These programs vary widely but can save $500–$3,000/year.
#2: Healthcare — The Fastest-Growing and Most Unpredictable Cost
Healthcare is where most retirement budgets fail. The typical retiree underestimates healthcare spending by 40–60% — not because they're careless, but because the costs are genuinely hard to forecast and grow faster than general inflation.
What healthcare actually costs in 2026
Medicare costs (standard, no IRMAA surcharge):
| Component | Monthly cost | Annual cost |
|---|---|---|
| Medicare Part A | $0 (for most) | $0 |
| Medicare Part B | $185 | $2,220 |
| Medicare Part D (average) | $55 | $660 |
| Medigap supplement (Plan G, age 65) | $130–$160 | $1,560–$1,920 |
| Total Medicare costs | $370–$400 | $4,440–$4,800 |
Per person. Married couples multiply by two.
Out-of-pocket costs (beyond Medicare):
| Category | Annual estimate |
|---|---|
| Dental care | $500–$3,000 |
| Vision (exams, glasses) | $200–$600 |
| Hearing aids (amortized) | $300–$700 |
| Prescription copays | $200–$800 |
| Non-covered procedures | $200–$2,000 |
| Over-the-counter medications | $300–$600 |
| Total out-of-pocket | $1,700–$7,700 |
Combined annual healthcare cost per person (Medicare + out-of-pocket):
- Low estimate: $6,000–$7,000/year
- Moderate estimate: $8,000–$10,000/year
- High estimate (chronic conditions, IRMAA): $12,000–$20,000+/year
For a married couple: $12,000–$40,000/year in healthcare costs is a realistic range.
The Fidelity benchmark: Fidelity's 2025 estimate suggests a 65-year-old couple retiring today should expect to spend approximately $300,000 on healthcare costs over retirement — not including long-term care. That's $15,000/year average over 20 years, front-loaded toward the later years.
Healthcare cost inflation
Healthcare costs rise approximately 4–6% per year — consistently faster than general CPI. The same coverage that costs $8,000/person today will cost approximately:
- $11,900 in 10 years (at 4% inflation)
- $17,700 in 20 years
- $26,300 in 30 years
A retirement budget that plans for flat healthcare costs is systematically underestimating its biggest growing expense. Build in 4–5% annual healthcare cost inflation — not the general 2.5–3% rate used for other categories.
How to manage healthcare costs
Choose Medicare coverage carefully. The annual Medicare Open Enrollment period (October 15 – December 7) lets you change plans. Review your coverage each year — plan costs and formularies change annually, and what was optimal last year may not be optimal today.
Use HSA funds strategically. If you've been contributing to an HSA, those funds can cover qualified medical expenses in retirement tax-free. An HSA balance of $50,000 represents $50,000 in tax-free healthcare spending — more valuable dollar-for-dollar than a taxable account.
Consider Medicare Advantage vs. Original Medicare + Medigap. The right choice depends on your health needs, preferred doctors, and financial situation. Get a personalized comparison before your initial Medicare enrollment period.
Plan for the pre-Medicare gap. If you retire before 65, ACA marketplace coverage is available — but can cost $700–$1,800/month without subsidies. Model ACA subsidies carefully against your retirement income, as large Roth conversions or capital gains can eliminate eligibility. Full guide: how much does healthcare cost in retirement.
#3: Food — Steady, Controllable, Often Underestimated
Food is the most controllable major expense in retirement — but also one where people frequently underestimate spending because they forget to include dining out, alcohol, specialty items, and the simple fact that having more time at home means eating at home more.
What food actually costs in 2026
| Household type | USDA moderate plan (monthly) | Including dining out |
|---|---|---|
| Single person 65+ | $350–$400 | $500–$600 |
| Couple 65+ | $650–$750 | $900–$1,200 |
Dining out is a separate budget item. The USDA food plan covers groceries only. Many retirees spend an additional $300–$800/month dining out — sometimes more in early retirement when social activity is high.
The retirement food reality: With more time at home and more control over your schedule, many retirees cook more elaborately than they did while working — which can increase grocery bills. They also attend more lunches, brunches, and dinners with friends, often spending more on food than when they were working and eating at desks.
How to manage food costs
Don't budget for the grocery store and forget restaurants. Budget both separately and honestly. If you dine out twice a week at $40–$80 per outing, that's $320–$640/month — not a trivial amount on a fixed income.
Grocery delivery and meal services. Some retirees find that grocery delivery reduces impulse purchases and food waste — saving $50–$100/month despite delivery fees. Others prefer the social aspect of in-store shopping. Either can work; just budget realistically for how you actually shop.
#4: Transportation — Higher Than Most People Expect
Transportation is the second-largest expense category for retirees after housing — and it surprises many people because they assume retirement means lower transportation costs (no commute, no work wardrobe driving trips). In reality, retirees still need reliable transportation for medical appointments, grocery shopping, social activities, and maintaining independence.
What transportation actually costs in 2026
| Cost | Monthly estimate |
|---|---|
| Auto insurance (one car, retiree discount) | $100–$200 |
| Gas or charging | $80–$150 |
| Registration and licensing | $15–$40 |
| Maintenance and repairs | $75–$150 |
| Car payment (if applicable) | $0–$600 |
| Total with paid-off car | $270–$540/month |
| Total with car payment | $270–$1,140/month |
Vehicle replacement: Even with a paid-off car, budget for eventual replacement. A new vehicle every 8–10 years costs $30,000–$60,000 — approximately $250–$500/month averaged across the replacement cycle.
Planning for reduced mobility in later retirement
One of the most important and least-discussed transportation planning issues: what happens when you can no longer safely drive?
- Ride-sharing services (Uber, Lyft): $15–$40 per trip; $200–$600/month for regular use
- Senior transportation programs: Many communities offer subsidized transportation for seniors — investigate local options
- Geographic planning: Choosing a retirement location with walkability, public transit, or proximity to services reduces car dependence
- Assisted living communities: Often include transportation services within fees
Budget for the transition from car ownership to assisted transportation — it typically happens in the mid-to-late 70s and represents a significant budget shift.
How to reduce transportation costs
Pay off the car before retiring. Like the mortgage, eliminating a car payment significantly reduces fixed monthly expenses. A $500/month car payment represents $6,000/year of inflexible spending that competes with healthcare and food.
Consider one car instead of two. If both spouses drove separate vehicles while working, retirement often allows consolidation to one vehicle — saving $3,000–$6,000/year in insurance, registration, and maintenance.
Right-size the vehicle. A large SUV or truck optimized for hauling may not be necessary in retirement. A smaller, more fuel-efficient (or electric) vehicle reduces fuel costs, insurance, and maintenance.
#5: Taxes — The Expense Almost Nobody Budgets For
Taxes are a genuine retirement expense that many people forget to include in their budget — because they were automatically withheld from paychecks during their working years. In retirement, taxes on traditional account withdrawals, Social Security benefits, investment income, and RMDs arrive as visible bills that must be actively managed.
What taxes cost retirees in 2026
A married couple with $65,000 in annual income ($22,800 Social Security, $42,200 in IRA withdrawals):
| Tax | Estimated annual cost |
|---|---|
| Federal income tax | ~$3,800–$5,500 |
| State income tax (varies) | $0–$5,000+ |
| Medicare Part B IRMAA (if applicable) | $0–$5,300+ |
| Estimated total tax burden | $3,800–$15,000+ |
For retirees with larger traditional IRA balances and higher RMDs, the total tax burden can be $15,000–$30,000/year — a significant budget item that erodes purchasing power.
How to reduce taxes in retirement
- Roth conversions before RMDs begin
- Strategic withdrawal ordering (taxable → traditional → Roth)
- Qualified Charitable Distributions for charitably inclined retirees
- Geographic relocation to tax-favorable states
Full guides: how are 401(k) withdrawals taxed and best states to retire for taxes.
#6: Leisure, Travel, and Entertainment — The Retirement You Actually Want
This is the category where retirement is either lived fully or resentfully — and where budget planning has the most direct impact on happiness.
What leisure actually costs
| Activity | Typical annual cost |
|---|---|
| Domestic travel (2 trips) | $4,000–$10,000 |
| International travel (1 trip) | $5,000–$15,000 |
| Golf (membership + fees) | $2,000–$8,000 |
| Theater, concerts, sporting events | $500–$3,000 |
| Streaming and media subscriptions | $600–$1,200 |
| Books, magazines, hobbies | $500–$2,000 |
| Club memberships | $500–$3,000 |
| Total leisure (moderate) | $5,000–$15,000/year |
The early-retirement leisure surge
Most retirees experience a leisure spending surge in the first 3–5 years of retirement — catching up on travel, pursuing hobbies that work prevented, spending more time with grandchildren. Budget $1,000–$2,000/month more than your long-run leisure budget for the first few years.
Planning for leisure costs
Budget leisure as an annual lump sum, then divide by 12. A $12,000/year travel budget is $1,000/month — manageable and visible in a monthly budget.
Sequence leisure-heavy spending in early retirement. Health and mobility are highest in your 60s. Budget more for active leisure early (travel, outdoor activities) and less for later years when physical limitations may naturally reduce spending.
#7: Long-Term Care — The Biggest Unbudgeted Financial Risk
Long-term care is the retirement expense most likely to be catastrophic — and the one most people completely ignore when building a retirement plan.
What long-term care actually costs in 2026
| Care setting | Monthly cost | Annual cost |
|---|---|---|
| In-home care (part-time aide) | $2,000–$4,000 | $24,000–$48,000 |
| Adult day services | $1,500–$3,000 | $18,000–$36,000 |
| Assisted living (private room) | $4,500–$7,000 | $54,000–$84,000 |
| Memory care facility | $6,000–$9,000 | $72,000–$108,000 |
| Nursing home (semi-private) | $8,000–$10,000 | $96,000–$120,000 |
| Nursing home (private room) | $9,500–$12,000 | $114,000–$144,000 |
The probability: According to the Department of Health and Human Services, approximately 70% of people turning 65 today will need some form of long-term care before they die. The average duration of care is approximately 3 years — though roughly 20% need care for more than 5 years.
Medicare does not cover custodial long-term care. Medicare covers skilled nursing facility care for a limited period following a qualifying hospital stay — not ongoing custodial care for activities of daily living.
How to plan for long-term care
Long-term care insurance: Purchased in your 50s, premiums are more affordable. By your late 60s, premiums are significantly higher and some insurers may decline coverage based on health conditions.
Hybrid life/LTC policies: Life insurance with a long-term care rider provides a death benefit if LTC isn't needed, or pays LTC benefits if needed. Increasingly popular as traditional LTC insurance premiums have risen.
Self-insuring through savings: A dedicated long-term care reserve of $200,000–$400,000 can cover most moderate care needs without insurance. Requires a larger overall savings target but provides flexibility.
Medicaid planning: For those with limited assets, Medicaid covers nursing home costs after asset spend-down. The rules are complex and state-specific — and planning 5+ years in advance is typically required to avoid Medicaid lookback penalties.
#8: Supporting Family Members — The Underplanned Expense
One of the most significant — and least discussed — retirement expenses is financial support for adult children, grandchildren, or aging parents.
The scope of family financial support
| Type of support | Annual cost range |
|---|---|
| Adult children (periodic help) | $1,000–$10,000 |
| Grandchildren's education (529 contributions) | $1,000–$15,000 |
| Care for aging parents | $0–$20,000+ |
| Emergency loans or gifts | Variable |
| Housing support for children | $3,000–$24,000 |
A 2024 AARP survey found that approximately 41% of adults 50+ provided financial support to an adult child in the prior 12 months, with an average contribution of $5,000+. This is money that directly competes with retirement savings and income.
Planning for family support
Be intentional before you retire. Decide explicitly how much, if any, family financial support fits within your retirement budget. An ad-hoc approach almost always leads to more support than planned.
Set limits before the conversations happen. It's much easier to say "we've budgeted $3,000/year for family assistance" when asked than to refuse in the moment without a clear framework.
Prioritize your own financial security. The standard airline safety instruction applies: put on your own oxygen mask first. A retiree who depletes their savings helping adult children faces the worst outcome — financial dependency in advanced age with no recovery options.
The Expenses Most Retirees Underestimate
Beyond the major categories, several specific costs consistently catch retirees off guard:
Home modifications for aging in place. Grab bars, walk-in showers, wheelchair ramps, stair lifts — the cost of modifying a home for mobility limitations typically runs $5,000–$30,000. Many retirees don't think about this until a fall or mobility event forces the issue.
Inflation on fixed expenses. Property taxes rise with assessed values. Homeowners insurance premiums increase with replacement costs. Utilities rise with energy prices. Fixed expenses in retirement aren't actually fixed — they drift upward at 2–5% annually.
Technology costs. New devices, internet service, streaming subscriptions, cybersecurity software — technology is an increasing budget line for retirees who want to stay connected and safe online.
Travel health insurance. Medicare doesn't cover medical care outside the US. Travel health insurance for international trips costs $50–$200 per trip — small, but easily forgotten.
Pet costs. Vet bills, food, grooming, and boarding for a pet can run $1,500–$5,000/year — more with chronic health conditions. And as pets age alongside their owners, end-of-life veterinary care can be unexpectedly expensive.
Estate planning updates. Wills, trusts, powers of attorney, and beneficiary designations need periodic review and updating — each review with an estate attorney costs $500–$2,000.
How Expenses Change Through Retirement
Retirement expenses aren't static — they follow a recognizable pattern:
Ages 60–74 (active phase): Highest discretionary spending — travel, hobbies, dining, entertainment. Housing costs are relatively stable if the mortgage is paid off. Healthcare costs are moderate (Medicare covers major needs). This is typically the highest-spending phase of retirement.
Ages 75–84 (transition phase): Discretionary spending gradually declines as physical mobility decreases. Healthcare costs begin rising. Transportation needs may shift from car ownership toward assisted options. Overall spending typically 10–20% below peak.
Ages 85+ (late phase): Dramatic increase in healthcare and long-term care costs. Significant decrease in discretionary spending. For those in assisted living or nursing care, total expenses may be the highest of retirement — driven entirely by care costs. Social Security and pension income continue; portfolio may be significantly depleted.
Budget implication: Plan for the spending pattern, not a single flat budget. Higher discretionary spending in the early years is appropriate and expected. Building a long-term care reserve from mid-retirement forward addresses the late-phase cost surge.
Build Your Complete Expense Plan
Understanding each category is step one. Combining them into a coherent monthly budget that balances against your specific income sources is what turns this knowledge into a retirement plan.
Our free retirement budget calculator walks you through every major expense category with built-in 2026 figures — helping you build a realistic, complete budget rather than guessing at a lump-sum number.
Related guides:
- How to create a retirement budget: step-by-step guide
- How much does healthcare cost in retirement
- How inflation affects your retirement savings
- How much do I need to retire
Frequently Asked Questions
What are the biggest expenses in retirement?
In order: housing (33% of spending), transportation (14%), food (12%), healthcare (12%), and taxes (varies but often $3,000–$15,000+/year). Healthcare and long-term care are the most underestimated. Housing is the most variable depending on whether you own or rent and where you live.
How much does the average retired person spend per month?
According to Bureau of Labor Statistics data, Americans 65 and older spend an average of approximately $4,800/month ($57,900/year). This average covers a wide range — from retirees living on $2,000/month Social Security to affluent retirees spending $10,000+/month. The median is somewhat lower than the mean.
What expenses go away in retirement?
Expenses that typically disappear: payroll taxes (Social Security and Medicare on wages), retirement savings contributions, commuting costs, work clothing, and often child-related expenses. These can represent 20–30% of pre-retirement spending — which is why the 70–80% income replacement rule makes intuitive sense.
What expenses increase in retirement?
Healthcare costs almost universally increase in retirement — particularly Medicare premiums, out-of-pocket medical costs, and eventually long-term care. Leisure spending often increases in early retirement. Home maintenance costs increase as the home ages and the owner is no longer doing DIY repairs. Some utility costs increase simply from spending more time at home.
How much should I budget for healthcare in retirement?
Budget at minimum $500–$700/month per person for Medicare premiums, supplemental coverage, and out-of-pocket costs. For couples, $1,000–$1,400/month total is a reasonable starting point, increasing by 4–5% annually. If you have significant chronic health conditions or plan to retire before Medicare eligibility at 65, budget substantially more. Full guide: how much does healthcare cost in retirement.
Should I budget for long-term care in retirement?
Yes — emphatically. Approximately 70% of people turning 65 today will need some form of long-term care. The average cost of assisted living is $4,500–$7,000/month; nursing home care runs $8,000–$12,000/month. Medicare does not cover custodial long-term care. Your plan should either include long-term care insurance, a hybrid policy, or a dedicated self-insurance reserve.
The Bottom Line
The biggest retirement expenses — housing, healthcare, food, transportation, and taxes — are knowable and plannable. The surprises come from underestimating healthcare's growth rate, ignoring long-term care entirely, and failing to build in inflation across all categories.
The most important planning steps:
- Housing: Eliminate the mortgage before retiring; budget 1–2% of home value annually for maintenance
- Healthcare: Budget $500–$700/month per person minimum; increase by 4–5% annually; plan separately for long-term care
- Transportation: Budget for vehicle replacement even with a paid-off car; plan for the eventual shift away from car ownership
- Taxes: Include income taxes on traditional account withdrawals as a real budget line
- Long-term care: Address it before it becomes a crisis — insurance, hybrid policy, or dedicated reserve
Every dollar you accurately budget now is a dollar you control. Every dollar you don't budget is a dollar that controls you.
Build your complete retirement expense plan with our free calculator.
Last updated: May 2026. This article is for educational purposes and does not constitute personalized financial advice. Consult a licensed financial advisor for guidance specific to your situation.