Retirement planning isn’t about guessing a magic number—it’s about matching real-world spending to reliable income. This guide starts with what retirees actually lay out each month (about $5,000 on average) and then pressure-tests that figure against common income sources, from Social Security to a 4% draw on savings. Along the way, you’ll see where the typical shortfalls arise and the practical levers—higher contributions, IRA add-ons, smart Social Security timing, and right-sizing expenses—you can pull to close the gap and fund the lifestyle you want.
Structure of Retiree Expenses
According to the U.S. Bureau of Labor Statistics, the Consumer Expenditure Surveys reveal that retired households generally spend about $5,000 monthly. Collecting data up to 2023, this spending encompasses:
- Housing: Expenses include mortgage payments, property taxes, utilities, and maintenance. Retirees without mortgage obligations often pay less monthly.
- Healthcare: Costs can be significant despite Medicare, covering premiums, co-pays, prescriptions, and long-term care.
- Food: This expense may decrease in retirement, though dining out and special diets affect individual budgets.
- Transportation: While commuting costs drop, retirees still invest in vehicle upkeep, insurance, fuel, and travel.
Will Your Savings Suffice?
Assessing retirement readiness involves examining savings and investment portfolios. Data from Empower indicates the median 401(k) balance for individuals aged 60 to 69 is $210,724, while the average balance reaches $573,624. As people retire, these balances typically dwindle, necessitating careful planning to meet retirement expenses averaging $60,000 annually, often without significant income beyond benefits.
Utilizing the 4% Rule: A widely recognized strategy for retirement withdrawals is the 4% rule, suggesting a 4% annual withdrawal rate to ensure a steady income while maintaining the principal amount.
Ways to narrow the gap
If projections show a deficit, numerous strategies exist to bolster financial security:
- Maximizing 401(k) Contributions: As of 2025, individuals over 50 can contribute up to $31,000 annually to a 401(k), per IRS guidelines.
- Investing in IRAs: Apart from employer plans, saving $7,000 or more in traditional or Roth IRAs remains viable.
- Enhancing Social Security Benefits: Delaying claims past full retirement age increases benefits by 8% per year until age 70.
- Revising Retirement Spending: Reducing expenses can be as effective as raising income by evaluating necessary expenditures post-career.
Conclusion
The typical retired U.S. household spends around $5,000 monthly, covering essential and discretionary expenses. With a median 401(k) balance of $210,724, applying the 4% rule equates to about $702 monthly, which, combined with the average Social Security benefit of $1,976, can be inadequate. Exploring ways to augment savings or reduce costs is advisable.
