A retirement budget is fundamentally different from a working-years budget. Income is no longer predictable take-home pay — it’s a mix of Social Security, investment withdrawals, and possibly a pension. Expenses don’t drop as much as people expect. And the entire budget must be inflation-proofed for potentially 30 years.
The Three Phases of Retirement Spending
Research consistently shows retirement spending isn’t flat — it follows a pattern:
| Phase | Ages | Spending Level | What Drives It |
|---|---|---|---|
| Go-Go Years | 65–74 | High (equal to or above working years) | Travel, activities, dining, home upgrades |
| Slow-Go Years | 75–84 | Moderate (declines 10–20%) | Reduced travel; more home-based activities |
| No-Go Years | 85+ | Mixed (healthcare reverses decline) | Medical costs and long-term care spike |
Planning implication: Front-load your travel and activity spending. Most retirees in their 80s wish they had traveled more in their 60s and 70s, not that they had saved more.
Average Retirement Budget by Category (2026)
Based on Bureau of Labor Statistics Consumer Expenditure data for households with one person 65 or older:
| Category | Monthly | Annual | % of Total |
|---|---|---|---|
| Housing (mortgage/rent + utilities) | $1,810 | $21,720 | 39% |
| Transportation | $680 | $8,160 | 15% |
| Food (home + dining out) | $593 | $7,116 | 13% |
| Healthcare | $628 | $7,536 | 14% |
| Entertainment | $274 | $3,288 | 6% |
| Personal care, clothing | $132 | $1,584 | 3% |
| Gifts and contributions | $191 | $2,292 | 4% |
| Miscellaneous | $248 | $2,976 | 5% |
| Total | ~$4,556 | ~$54,672 |
Building Your Personal Retirement Budget
Step 1: List Fixed Monthly Expenses
| Expense | Your Amount | Notes |
|---|---|---|
| Housing (mortgage/HOA/rent) | $_______ | |
| Property taxes (if not in mortgage) | $_______ | |
| Homeowner’s/renter’s insurance | $_______ | |
| Medicare Part B premium | $185 ($_______ with IRMAA) | |
| Medicare supplement/Advantage | $_______ | |
| Part D prescription | $_______ | |
| Life insurance (if still carrying) | $_______ | |
| Car insurance | $_______ | |
| Utilities (electric, gas, water) | $_______ | |
| Internet and phone | $_______ | |
| Subscriptions (streaming, etc.) | $_______ |
Step 2: List Variable Monthly Expenses
| Expense | Monthly Estimate | Notes |
|---|---|---|
| Groceries | $_______ | |
| Dining out | $_______ | |
| Transportation (gas, parking, Uber) | $_______ | |
| Clothing | $_______ | |
| Entertainment | $_______ | |
| Personal care | $_______ | |
| Out-of-pocket medical/dental/vision | $_______ |
Step 3: Annual and Irregular Expenses (Divide by 12)
| Expense | Annual Estimate | Monthly Reserve |
|---|---|---|
| Travel and vacations | $_______ | $_______ |
| Home maintenance and repairs | $_______ (1% home value) | $_______ |
| Car maintenance and repairs | $_______ | $_______ |
| Vehicle replacement fund | $_______ | $_______ |
| Holiday gifts | $_______ | $_______ |
| Taxes (income, property if separate) | $_______ | $_______ |
| Long-term care reserve | $_______ | $_______ |
Sample Retirement Budgets by Income Level
Modest Retirement: $45,000/Year
| Category | Monthly | Annual |
|---|---|---|
| Housing (owned, no mortgage) | $800 | $9,600 |
| Healthcare | $600 | $7,200 |
| Food | $550 | $6,600 |
| Transportation (1 car) | $500 | $6,000 |
| Utilities | $300 | $3,600 |
| Entertainment | $200 | $2,400 |
| Miscellaneous | $250 | $3,000 |
| Buffer/irregular | $550 | $6,600 |
| Total | $3,750 | $45,000 |
Comfortable Retirement: $72,000/Year
| Category | Monthly | Annual |
|---|---|---|
| Housing (mortgage paid off by 70) | $1,200 | $14,400 |
| Healthcare | $900 | $10,800 |
| Food | $800 | $9,600 |
| Transportation (1–2 cars) | $700 | $8,400 |
| Travel | $700 | $8,400 |
| Entertainment | $400 | $4,800 |
| Utilities | $350 | $4,200 |
| Gifts and family | $350 | $4,200 |
| Miscellaneous/buffer | $600 | $7,200 |
| Total | $6,000 | $72,000 |
Affluent Retirement: $120,000/Year
| Category | Monthly | Annual |
|---|---|---|
| Housing | $2,000 | $24,000 |
| Healthcare | $1,200 | $14,400 |
| Travel | $2,000 | $24,000 |
| Food and dining | $1,200 | $14,400 |
| Transportation | $900 | $10,800 |
| Entertainment and hobbies | $700 | $8,400 |
| Gifts and charitable | $700 | $8,400 |
| Miscellaneous/buffer | $1,300 | $15,600 |
| Total | $10,000 | $120,000 |
The Healthcare Budget Mistake
Most retirees dramatically underestimate healthcare costs. Here’s a realistic annual healthcare budget for a couple on Medicare:
| Cost | Annual Amount |
|---|---|
| Part B premiums (2 × $185/mo) | $4,440 |
| Medigap Plan G (2 policies, avg $250/mo each) | $6,000 |
| Part D plans (2 × $50/mo average) | $1,200 |
| Dental (not covered by Medicare) | $2,000–$5,000 |
| Vision | $600–$1,500 |
| Hearing aids (amortized every 5 yrs) | $800–$1,600 |
| Out-of-pocket copays and Rx | $1,000–$3,000 |
| Total: realistic couple healthcare budget | $16,000–$23,000/year |
Inflation-Adjusting Your Budget
| Inflation Rate | $60,000 Budget in 10 Years | In 20 Years |
|---|---|---|
| 2.5% | $76,775 | $98,373 |
| 3.0% | $80,635 | $108,367 |
| 4.0% | $88,814 | $131,529 |
Healthcare inflation historically runs 5–6% — higher than CPI. Budget accordingly.