Where Seniors Spend Money [Retirement Expense Guide] - Magna Life (2024)

Saving for retirement is a necessity. but beyond the idea of “putting money away for later,” or just creating a budget worksheet, how much do we really know about the actual costs incurred by American seniors?

It’s a misconception that spending decreases after retirement; in fact, a study by the Employee Benefit Research Institute shows that 33 percent of all households containing retirees increase their expenses in the six years after they stop working.

Whether due to mandatory needs like healthcare or elective spending like travel, seniors have more need than ever to have a handle on their finances and a thorough understanding of income options likelife settlements.

The following are some of the primary areas where research shows expenses are rising for seniors:

Healthcare Costs

This is the category that hits many senior adults retirement expenses the hardest, because of the obvious surge in medical needs as people age. An articlefrom CNN Money estimates that the average 65-year-old man will spend $189,687 on healthcare in retirement, while an average 65-year-old woman will spend $214,565. Because medical situations and their attendant costs are unpredictable, they are one of the key reasons seniors need to seek alternate sources of income and understand how to plan for healthcare expenses during retirement.

Housing Costs

Even if healthcare retirement expenses can mount fast, housing expenses are the most consistent hits on a senior’s budget. A study from the Social Security Administration indicates that households with people over 65 spend about 35 percent of their funds on housing, more than twice the amount spent on monthly expenses on out-of-pocket healthcare, which came to 13 percent. When all of the costs associated with housing are considered—mortgage or rent payments, utilities, maintenance and furnishings—seniors spend an average of $14,034 annually, according to a breakdownin U.S. News and World Report.

Transportation and Travel

Even though some seniors see a drop in gas costs when they stop working, transportation is still the second-largest expenditure, according to the Social Security Administration study, comprising 15 percent of the average senior’s budget. Transportation costs, as well as money spent on hotels, food and other entertainment, tend to rise in the retirement years because of the extra time for travel in retirement years. To mitigate this expense, seniors can seek travel discounts just for those 65 and older, and they can also take advantage of the freedom to travel during off-peak times when working people are unavailable.

Long-Term Care

Americans are living longer and care options are becoming more expensive, a combination that leads to a consistent gap between needs and resources for today’s retirees. Even those who purchase long term care insurance may find the benefit isn’t sufficient for their needs, and many seniors don’t put money away for the possibility and end up in a financial bind when they need long-term care. A study by Genworth Financial shows that long-term care, independent of medical bills, costs seniors anywhere from $18,000 a year (adult day care) to $97,000 a year (private room in a nursing home). And it’s a situation the majority of seniors will face; about 70 percent of 65-year-olds will incur some type of long-term care costs in their lifetime, at an average cost of $138,000 per person.

Food Costs

Of course, people over 65 continue to incur the same basic expenses as every other age group, and food is no exception. Seniors can save by using coupons or store discounts, but groceries and dining out still make up one of the major budget categories for older Americans.

For the cost-conscious senior, eating at home is by far the more economical option, although travel and other obligations can make the convenience of restaurants much more tempting. An example presented in a Motley Fool article speculated that if an average cost for food for a meal at a restaurant costs $50, the same food prepared at home would cost $12.50.

Using those numbers, the article calculated that a senior who skipped two restaurant meals a month would save $900 a year.

Even though these five categories are typically the ones that cause the most headaches for seniors, other expenses can also be unexpectedly high during retirement—education costs for family members, insurance and entertainment, to name a few. Seniors can help to combat an expensive retirement scenario with a number of strategies, including part-time employment, using their resources as sources of income (such as renting out a room or driving for a ride sharing service), understanding tax deductions for seniors or cashing in an unwanted life insurance policy.

Seniors don’t have to cancel life insurance; instead, a life settlement can turn a burdensome policy into a valuable asset. Magna Life Settlements buys existing life insurance policies, and any senior seeking to budget for retirement expenses should become informed about the growing popularity of such settlements. To learn more, set up a callwith a Magna representative today.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.