7 Major Expenses in Retirement (and How To Reduce Them!)


Many people spend their working years trying to save enough money for retirement. But how can you predict what your spending will look like then?

While no one can see into the future, we can rely on research to understand the major expenses in retirement — and to come up with a plan to keep them as low as we can.

Here’s What Your Spending Will Probably Look Like in Retirement

According to data from the Employee Benefit Research Institute, here’s a breakdown of the biggest average annual expenses among older households from a study it conducted in 2017.

Spending CategoryAge 50 - 64Age 65 - 74Age 75 and Older
Health Care7.8%9.6%10.6%
Gifts and Contributions4.7%5.4%6.3%

Source: Employee Benefit Research Institute estimates from the Health and Retirement Study (HRS).

Some categories, such as health care and gifts/contributions, become quite a bit more expensive over time as you get deeper into retirement. Meanwhile, other categories, including transportation and entertainment, actually become less of a spending priority for most people (and therefore cheaper) as you age.

Whether you’re well into your retirement or you’re still preparing diligently in your “pre-tirement” years, we’ve got ideas to help you lower the seven main retirement expense categories.

Table of Contents:

  1. Housing
  2. Food
  3. Health Care
  4. Transportation
  5. Entertainment
  6. Gifts and Contributions
  7. Clothing

1. Housing

There are multiple ways to lower the cost of your housing in retirement:

  • Pay off your mortgage
  • Downsize your living arrangement
  • Take on a tenant

Pay Off Your Mortgage

Paying off your mortgage before you hit retirement is one of the smartest things you can do to keep your living expenses low after you stop working.

It has the added benefit of increasing your happiness, according to research. That’s according to certified financial planner Wes Moss, who interviewed more than 1,350 retirees across 46 states to see what created happiness in retirement.

“One of the main recurring themes was that the happiest and most successful retirees had either eliminated or dramatically reduced their mortgage payment before pressing the retirement button,” Moss says.


“My advice is to follow the one-third rule. If you can pay off your mortgage using no more than one-third of your non-retirement savings, considering paying off your mortgage — today.”

Downsize Your Living Arrangement

Are you an empty nester? Then it’s the perfect time to reassess your living situation. Chances are you don’t need the big house anymore.

That might mean it’s time to downsize and get into something more manageable. As an added incentive, you’ll likely be able to stash some cash from the sale of your current home in the process.

“If you are planning to move while in retirement, be sure that you can move into a new home without having a mortgage,” Moss says, “essentially swapping your current home equity (or paid-off mortgage) for a home owned ‘free and clear.’”

Take on a Tenant

Maybe you’re not keen on leaving your current home and would prefer to stay close to neighbors, friends and family. In that case, you could try becoming a landlord to help defray your housing expenses.

Joel of Team Clark is far from retirement age, but he’s been able to build wealth slowly through buying rental properties over the past 10 years or so. He’s even had tenants live in a space attached to his main house.

If you’re interested in finding a good tenant, be sure to check out Joel’s tips to help landlords find good tenants.

2. Food

Barring the impact of inflation, the cost of food is one of those things that the research shows remains pretty constant after you retire. Fortunately, it’s easy to save money on food.

If you’re looking for a way to cut down on spending at the grocery store, shopping at a place with a senior citizen’s discount could be one way to do it. We’ve got a list of grocery stores that offer senior discounts to get you started.

This tip to shop where you get a senior discount is really a twofer. Not only do you save on the front end, you also continue the savings after you leave the supermarket. That’s because cooking and eating at home is among the best ways to save money on food.


Meanwhile, for those times that you want to go out, we’ve got a list of 20+ senior restaurant discounts so you can save money even as you splurge a little. And some of these “senior” discounts are available starting at age 50!

3. Health Care

Health care is probably the single biggest expenditure you’ll face in retirement. And as you might expect, it’s one of those expenses that typically rises as you age.

Most people will be eligible for Medicare once they turn 65. But if you retire early, you may have to purchase health care on your own. For many folks, that means shopping the health care exchanges on HealthCare.gov.

Meanwhile, we’ve got a couple other ways for you to lower the expenses related to staying healthy.

Get a Free Gym Membership

It’s often been said that an ounce of prevention is worth a pound of cure. That’s never more true than when you age. It’s important to stay active in your golden years for both your physical health and your mental well-being.

Fortunately, the SilverSneakers program offers an affordable way for senior citizens to do just that. Membership is often free through your health insurance plan if you qualify.

With SilverSneakers, you get access to:

  • Fitness equipment at more than 16,000 gyms and community locations across the country
  • Group exercise classes for all fitness levels
  • Pools, tennis courts and walking tracks
  • Social networking through community events centered around health and wellness
  • Online education, including nutrition and fitness tips

For more info, read our article: Things to Know About the Silver Sneakers Program.

Use an App To Save Money on Prescriptions

Thanks to technology, it’s become easy to save money on the cost of your prescription medications.

There are a variety of free apps out there that will help you find the cheapest prices on both generic and brand-name drugs including:

  1. Blink Health
  2. GoodRx
  3. RxSaver
  4. SingleCare
  5. WellRx

Here at Clark.com, we comparison-shopped 15 of the most popular prescriptions in America across these five apps in the spring of 2020. The results were clear: RxSaver offered the cheapest price or tied for the cheapest price in 10 out of 15 instances.

However, GoodRx got top marks for identifying free drug offers at nearby pharmacies. See the full results of our in-depth survey here.

4. Transportation

The cost of transportation as a percentage of your retirement budget is likely to drop dramatically as you age. That’s partly because certain conditions may prevent people in retirement from being able to drive.

Even so, there are a couple of ways you can save money on transportation while you’re still driving.

As a baseline, one of the best things to do is to comparison shop your auto insurance. You could save hundreds of dollars a year just by doing this. We’ve got a full guide to walk you through the process here.

Meanwhile, ride-hailing services including Uber and Lyft ,if used judiciously, offer great opportunities for you to dramatically lower the cost of moving around. These options can also serve as an alternative to traditional car ownership.

Finally, you may also have access to public transportation depending on where you live. This can take the form of bus, rail, light rail or bus-rapid transit.

Any of these options will help you lower your transportation budget. And that’s important when you consider that AAA put the average annual cost of owning a new vehicle in 2020 at $9,561 (that’s almost $800 a month).

5. Entertainment

Your budget for entertainment is another thing that’s likely to decline the deeper you get into retirement.

Fortunately, it’s easy to find free or cheap things to do, and there’s certainly no shortage of them. We’ve got a guide on how to get started here.


Here are just a few of the activities we discuss in our guide:

  • Free workout apps
  • Geocaching
  • Potlucking
  • Scrapbooking
  • Time capsuling
  • Volunteer opportunities

And don’t overlook local establishments like museums and cultural centers that may offer free admission on certain days of the week.

For example, if you’re a Bank of America customer you can get free entrance to big-name museums on the first full weekend of every month through the company’s Museums on Us program.

6. Gifts and Contributions

Gifts and contributions are probably the only truly discretionary item on our list of retirement expenses. But interestingly, this is one category where your expenditures are likely to increase as you age.

Before making any large donation, you should make sure the organization that’s going to get your money will be a good steward of those funds. You can do that with the tools on these websites:

Every charity has different overhead costs. The websites listed above will help you determine how much of your donation goes to its intended purpose vs. those overhead costs.

Just remember this: You can’t put a price tag on everything. Some of the most meaningful donations can include the gift of your time and talent!

You might consider donating blood, reading to the blind or mentoring a younger person, to name just a few possibilities.

7. Clothing

For most people, just the mere act of quitting work means you’ll automatically have fewer expenses with your wardrobe going forward.

Clothing is an expense category that the numbers show stays relatively flat as you go through retirement. But there are still several ways to lower this line item in your budget.


Several major retail chains with clothing departments offer senior discounts of up to 20% on certain days of the week.

Be sure to check out our complete list of retail stores that offer senior discounts so you know when to go to which store.

Final Thought

Saving money for retirement can feel daunting if you don’t know what your expenses will look like. But thanks to the numbers from the Employee Benefit Research Institute, we can get a sense of what to expect.

Thankfully, it’s relatively easy to reduce your expenditures in these categories. And remember getting on a budget can help you make sure you’re on track!

Have even more ideas about how to save money in retirement? Please share them in the comments below!

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