Cost of Retirement

Most of us assume that the cost of living for a retiree is less than that of the average working adult. MarketWatch has an article by Robert Powell, which discusses how much retirment expenses actually are.

Retirees spend more on healthcare and insurance than a working adults, but what about their other expenses? Hopefully by retirment you will have your house paid off. You will not have work-related costs, such as clothing or transportation costs.

MarketWatch quotes a study, "Understanding Expenditure Patterns in Retirement," published by the Boston College Center for Retirement Research. The study shows that the typical married couple, ages 65 and older, spend about $15,000 annually. The top 20% of retirees spend around $25,500, and the bottom 20% have expenses just over $10,000.

Richard Johnson, an author of the study, broke down the average retirees expenses.

• 29% - housing
• 20% - health care
• 8% - health insurance
• 6% - prescription drugs
• 4% - health services
• 1% - medical supplies
• 13% - food
• 12% - transportation
• 10% - entertainment
• 10% - gifts

There are a few reason for the great expense on housing. One reason is that one quarter of retirees still carry a mortgage. The rising cost of property taxes, utilities, and maintenance also increase the cost of housing. He also points out that the married couple spends 84% of their aftertax income.