Retirees Face Surprising Budget Gaps Today—How Do Your Monthly Expenses Stack Up?

One of the most pressing questions you’ll face as a retiree is: How much money will I need to maintain a comfortable lifestyle once I stop working?

To answer that question, you have to understand the average monthly expenses of retired individuals and evaluate whether your savings will be enough.

Generally speaking, if you spend what the average retiree spends, you’ll need around $5,000 per month ($60,000 per year) during retirement.

Average Monthly Expenses for Retirees

The U.S. Bureau of Labor Statistics (BLS) provides valuable insights into spending patterns of retired households. According to data from the Consumer Expenditure Surveys (CES), the average retired household spends approximately $5,000 per month. (Note that this information is based on data collected on 2023 spending and is the most recent available.) This includes but is not limited to:

• Housing. Costs include mortgages, property taxes, utilities, and maintenance. Retirees who have paid off their mortgages generally face lower monthly costs.
• Healthcare. Even with Medicare coverage, a retiree’s budget can be strained by out-of-pocket premiums, co-pays, prescription drugs, and long-term care.
• Food. Food spending tends to decline slightly in retirement compared to preretirement years. However, dining out and special dietary needs can influence individual costs.
• Transportation. While commuting expenses drop, retirees can still spend on vehicle maintenance, insurance, fuel, and recreational travel.

Will Your Savings Be Enough?

One benchmark to assess your retirement readiness is your total savings and investment portfolio. Data from Empower reveals the median 401(k) balance for individuals ages 60 to 69 is $210,724. The average balance for this age range was $573,624. (Financially experts typically prefer medians because averages can be skewed by abnormally large numbers.)

It’s important to consider how this balance decreases by age. For example, Empower also reported the median balance for those in their 70s was $106,654. This is a function of (1) individuals leaving the workforce and rolling over their retirement savings to other retirement accounts and (2) needing to draw down their retirement accounts.

Remember, the average household in retirement spends $5,000 per month ($60,000 per year). So that’s the number we’ll be shooting for.

To figure out if the average retired household in the United States will have enough for retirement (that is, about $5,000 per month), we need to find out how much income the average household brings in during retirement. We can start with Social Security. The average monthly Social Security benefit is $1,976—so that leaves $3,024 a month. To discover whether the median retiree’s nest egg will provide that much per month, we’ll use the 4% rule, which states that you can safely withdraw 4% of your nest egg without running out of money for 30 years.

The median 401(k) balance for individuals ages 60 to 69 is $210,724. To apply the 4% rule, we multiple that number by 4%, then divide it by 12 (the number of months in a year). This means the median retiree can withdraw $702 per month from their nest egg. Combined with the average Social Security benefit, we find that the average retiree won’t have enough—they’ll have a shortfall of $2322 per month, which is $5000 – ($1976 + $702).

Strategies to Bridge the Gap

If your current retirement projections indicate a shortfall, don’t panic. There are actionable steps you can take to ensure financial security:

1. Maximize 401(k) Contributions. For 2025, the Internal Revenue Service (IRS) allows individuals ages 50 and older to contribute up to $31,000 annually to their 401(k).
2. Contribute to IRAs. Beyond employer-sponsored plans, individuals age 50 and older can save $8,000 in traditional or Roth individual retirement accounts (IRAs).
3. Increase Social Security Benefits. Each year you delay claiming Social Security past your full retirement age, your benefits increase by 8%, up to age 70.
4. Evaluate Retirement Spending. Consider what you will need to spend money on in your post-career period. Decreasing costs can be just as good as increasing income.

If you find yourself in this boat, consider some techniques to increase your savings or decrease your expenses.