Retirement Spending: 10 Budget Categories Americans Expect

The Nationwide Financial survey of 1,831 adult Americans provides a detailed blueprint of how different generations expect to allocate their retirement income. Topping the list of anticipated expenses are monthly bills, such as utilities and cable, which retirees believe will consume 18% of their income. This is closely followed by housing and groceries, each expected to claim 16% of the budget. These figures, while projections, paint a picture of retirement where the fundamentals of daily life take precedence. This expectation aligns with data from the Bureau of Labor Statistics (BLS), which often shows housing and healthcare as the most significant actual expenses for retirees, suggesting that public perception is attuned to financial realities.

However, a critical distinction exists between expectation and reality. The survey captures what people *think* they will spend, whereas BLS data on actual consumer expenditure often reveals different patterns, such as lower spending on investing and saving than anticipated. This gap underscores the importance of grounding retirement plans in robust data rather than assumptions. The common rule of thumb suggesting retirees will need 80% of their pre-retirement income is revealed as a mere benchmark, with actual needs varying wildly. Some retirees may live comfortably on 70%, while others, facing high healthcare costs or housing payments, could require more than 100% of their former income.

The survey’s most significant finding is the overwhelming share of income earmarked for essential, non-discretionary spending. When combined, categories like monthly bills (18%), housing (16%), groceries (16%), and healthcare (10%) are expected to consume roughly 60% of a retiree’s income. Factoring in other essentials like transportation (6%), this figure climbs to account for about three-quarters of total expected spending. This reality check tempers the popular image of retirement as an endless vacation. The expectation for healthcare costs, pegged at 10% of income, may even be optimistic. Fidelity Investments provides a more concrete, and daunting, figure: a 65-year-old couple retiring in 2025 can expect to spend an average of $167,000 on healthcare throughout their retirement.

Furthermore, the expectation for grocery spending arrives at a time of significant inflation. The article notes that from 2019 to 2023, food-at-home prices rose 20–23%, while food-away-from-home costs increased 23–24%. This suggests that the projected 16% allocation for groceries might be a low estimate, potentially squeezing retirees’ budgets even further. The high anticipated cost of housing, whether from ongoing mortgages, rent, or home maintenance, reinforces that achieving a debt-free retirement is an ideal that remains out of reach for many.

In contrast to the large allocations for essentials, the survey indicates that discretionary spending will play a more modest role. Categories like vacation and entertainment, often central to the retirement dream, are expected to account for a combined total of only 20–25% of income. Vacation spending is projected at 7%, the same percentage allocated for continued savings—a surprising category that highlights the prudence of maintaining a financial buffer even after leaving the workforce. Entertainment is expected to claim 6% of the budget.

This allocation for leisure activities, while not insignificant, is far from the dominant force in the retirement budget. It suggests that Americans are realistically calibrating their expectations, understanding that daily living costs will impose firm limits on their discretionary freedom. The data implies that a successful retirement plan is not about funding an extravagant lifestyle, but about securely covering essential costs so that the remaining funds can be enjoyed without financial anxiety.

The overarching lesson from the Nationwide Financial survey is the critical need for personalized, detailed retirement planning. Relying on a general benchmark like the 80% rule is insufficient. Future retirees must conduct a granular analysis of their anticipated expenses, with a sharp focus on the big-ticket items: housing, healthcare, and food. The expectation that essential costs will consume about 75% of income serves as a powerful reminder to prioritize these areas in savings goals.

Ultimately, the survey reinforces that understanding spending is the foundational step to determining savings needs. As the article concludes, focusing solely on a target nest egg amount is ‘putting the cart before the horse.’ By first projecting realistic costs across these ten categories, Americans can build a retirement plan that is not based on hopeful assumptions, but on a clear-eyed view of their financial future, ensuring their hard-earned savings are allocated as effectively as possible.