The Most Important Retirement Chart You Will Ever See

Financial anxieties are high on many people’s retirement worries list. There is a good reason for that. In retirement, your earned income goes away and you are forced to rely on your investments, social security and pension to make ends meet.

It is these concerns that could make the table below the most important pension table you will ever see. It shows exactly how people’s spending changes as they age. It also reveals the key area (health care costs) where seniors tend to spend more than their younger counterparts, and how much that spend tends to be.

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Typical expenses by age group

This table contains data compiled by the Bureau of Labor Statistics (BLS) from the 2020 Consumer Spend Survey. It shows what households tend to spend based on the age of a caregiver in the household.

The good news for aspiring retirees is that the total cost of retirement tends to decrease. In fact, the cost of people well into retirement tends to be lower than any other age group, with the exception of those who are just beginning their independent lives. If you exclude healthcare costs, seniors 75 and older tend to spend less than people of any other age group.

Age group

Average expenses

Average health care costs

Average with no health care

Under 25

$ 38,070

$ 1,350

$ 36,720

25-34

$ 57,641

$ 3,320

$ 54,321

35-44

$ 74,156

$ 4,579

$ 69,577

45-54

$ 74,783

$ 5,465

$ 69,318

55-64

$ 64,937

$ 5,684

$ 59,253

65-74

$ 52,356

$ 6,695

$ 45,661

75 and above

$ 40,839

$ 6,627

$ 34,212

Table by author. Source: Bureau of Labor Statistics

However, these health care costs make up a large and growing proportion of people’s spending as they age. This makes it clear that seniors have good reasons to worry about this category, even though the rest of their expenses may decline over time.

Why these trends make sense

If you think about it, the end-to-end story is linked. When you’re young, you’re more likely to be healthy, but you also have a lot of start-up costs to start your independent life. Raising a family puts more expenses on your plate, which may culminate when your kids go to college or business school.

Once your children have left school and started living independently, there will be no education costs. Likewise, housing costs could come down once your mortgage is paid off, or you could downsize your house once your children are gone. Then when you stop working, the costs you pay to keep your job are eliminated.

Direct labor costs include things like wage taxes, travel expenses, a work wardrobe, and the “network costs” for things like team happy hours and office birthday and wedding parties. Indirect labor costs include household services (cooking, cleaning, household maintenance and work-related rental linen).

When you put all the pieces together over the course of a typical life, it is clear why other than health care expenditures tend to decrease with age. These costs tend to increase with age, but as the BLS data shows, decreasing costs more or less compensate for higher medical costs elsewhere.

What that means for you

The big benefit illustrated in this graph is that it helps make a decent retirement much easier. When you consider the huge cost of starting a family and paying a mid-career mortgage, hope that the end really is in sight. Your total cost of living is unlikely to escalate forever, and your annual retirement price may not be anywhere near what you pay today (adjusted for inflation).

Additionally, looking at things from a cost perspective rather than a current income perspective can help you get a better idea of ​​how much you really need to save. Since typical retirement policies are based on replacing a certain percentage of your income, you may be relieved that you could get away with less and still lead a decent lifestyle.

Also, keep in mind that you are likely to get something from Social Security. This income reduces the amount you need to cover with your nest egg, which further reduces the amount you absolutely need to save to cover your core living expenses.

get started now

If putting these pieces together helps you overcome the panic and get to a point where you can start saving the nest egg you need, then this table has done its job well. Regardless of how you get to this place, the most important thing you can do for your future is to save now.

As this table shows, the typical retiree household still spends between $ 40,000 and $ 53,000 a year (pre-inflationary). The sooner you start building savings to cover costs that Social Security won’t cover, the easier it will likely be for you to have that money before you need it. So start now and get on your way to a better financial future.

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