How do I estimate what I will spend in retirement?

Rules of thumb such as a fixed percentage of your pre-retirement income are guesses. Your own records are better. Pull 12 months of bank and card statements and total what left your accounts, not what you think you spend.

Sort it into two lists. Essential: housing, utilities, food, insurance, transportation, minimum debt payments. Flexible: travel, dining out, gifts, hobbies. Essentials are what your guaranteed income, such as Social Security and any pension, ideally needs to cover. Flexible spending is where you have room to cut in a bad year.

Then adjust for retirement. Subtract costs that end with work, such as commuting and payroll taxes. Add health care, including Medicare premiums or pre-65 coverage. Add income taxes on withdrawals. Add irregular costs averaged per year: a car every 10 years, a roof, appliances, help for family. A $30,000 car every 10 years is $3,000 a year.

For a reality check, households headed by someone 65 or older spent an average of $61,432 in 2024 in the BLS Consumer Expenditure Surveys. Housing was $22,193 of that, about 36%, and health care $7,799. Spending tends to fall with age: $65,354 for ages 65 to 74 and $55,834 for 75 and older.

What averages miss: they mix renters and owners, singles and couples, and every income level. Use them to spot a line you forgot, not as your number. Spending also changes over a retirement, often higher early for travel and higher late for care.