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If you rely on retirement calculators, one money expert advises – make sure you take a careful look at the results.
“Here’s my framework from decades in finance: plan for high spending in your 60s, moderate spending in your 70s and low spending except for health care in your 80s,” said Andrew Lokenath, founder of the blog. expert in finance. “Most retirement calculators forget this. They assume flat spending during retirement, which causes people to either overspend early or accumulate money they never enjoy.”
GOBankingRates explains how different a retirement budget looks at age 65 compared to age 75.
planning for retirement budget
Most middle-class retirees aged 65 spend about $5,400 per month, or about $65,000 annually, per Lokenath. He said that at the age of 75, monthly expenses reduce to about $4,400.
Lokenath said the decline surprised most people because they believed health care costs would skyrocket. He said that although health care has increased slightly to $700 monthly, other categories have declined.
“This is a big change compared to working years,” Lokenath said. “During my years on Wall Street, I saw clients struggle with this change because they underestimated how spending patterns change.”
Retirement budget at ages 65 and 75
Take a look at what Lokenath said about the expected monthly budget for ages 65 and 75, based on his work on Wall Street and with clients.
Monthly budget for a 65-year-old (total $5,400):
- Accommodation: $1,850
- Transportation: $900
- Healthcare: $660
- Meal: $610
- Entertainment: $290
- Other: $1,090
Monthly budget for a 75-year-old (total $4,400):
- Accommodation: $1,700
- Healthcare: $700
- Transportation: $680
- Meal: $570
- Entertainment: $200
- Other: $550
Putting budget numbers in perspective
Lokenath said the biggest declines were in transportation (24% decline) and entertainment (31% decline). According to Lokenath, housing has declined by only 8%, indicating that it remains a large expense, but has become more manageable.
“I work with some clients who moved to the city for retirement to help them prepare for the time when they won’t be able to drive,” said Marguerita Cheng, Certified Financial Planner (CFP) and CEO. Blue Ocean Global Wealth. “City living may not be for everyone. I also work with other clients who moved into continuing care communities for a more stress-free life.”