Retirement often brings financial changes, and while many expenses rise, there are some unexpected savings to discover. While inflation can chip away at your purchasing power over time, certain costs may decrease as you enter your golden years.
It’s worth exploring these surprising silver linings to see how they can boost your retirement budget.
Today, I’ll walk you through some of the products and services that actually become cheaper when you retire. They won’t make for a complete respite from high retirement costs, but at least within certain spending categories, your retirement budget might not be nearly as tight as you anticipated—and maybe you won’t have to cut costs as much as you expected.
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Table of Contents
Expenses That Are Lower During Retirement
As you save money for retirement, it’s better to err on the side of saving too much, rather than too little.
Conversely, you don’t want to stress yourself out unnecessarily by budgeting far more strictly than you actually need. After all, stress is bad for your health … and health coverage is expensive at any age.
So read on as I show you a few ways to take at least a couple of those financial bricks of your shoulders in retirement.
1. Retirement Contributions
Let’s start with an obvious one: retirement contributions.
Once you retire, you finally get to make the switch from putting money into retirement accounts to pulling money out of them. Most financial experts suggest you contribute around 15% of your pre-tax income to retirement savings (though individual circumstances vary). In retirement, that expense is completely eliminated.
Just make sure you’re aware of withdrawal rules, lest you rack up new expenses in the form of IRS penalties. Tax-advantaged retirement plans (401(k)s, IRAs, etc.) have early withdrawal penalties; for instance, if you withdraw money from a 401(k) before age 59½, you’ll not only have to pay federal and state income tax like you normally would, but a 10% penalty to boot.
The average retirement age in the United States is 63, so most people don’t have to worry about early withdrawal penalties. Still, this fact is important to remember if you plan on retiring early.
2. Food
Currently, the Silent Generation (people between ages 78 to 96 years old in 2024), spends the least amount on food out of all generations. And there’s a good chance you’ll spend less on food when you reach that age range as well.
According to Consumer Expenditure Surveys by the U.S. Bureau of Labor Statistics, in 2021, the breakdown of average annual food expenditures by generation was as follows:
— Gen Z: $5,529
— Millennials: $8,463
— Gen X: $10,388
— Baby Boomers: $7,651
— Silent Generation: $5,487
There are several reasons those numbers get lower with age. To start, at some point, kids move out and you’re no longer responsible for all of their food. Many people also eat out less when they get older. Of the money the Silent Generation spends on food, about three-quarters is spent on food at home, while only about one-quarter is spent on food away from home.
Many older adults also take advantage of senior dining discounts and may spend more time comparing prices or clipping coupons.
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3. Transportation
Although transportation is still a significant expense, the yearly costs typically go down once you call it a career.
According to BLS data, U.S. households spend nearly $11,000 a year on transportation costs, such as vehicles, car insurance, and gas. For adults age 65 and older, that average dips to a little above $7,000.
Anyone retiring from an in-person job can skip out on those long daily commutes—putting fewer miles on the car. That’s less gas spent idling while you’re packed in like sardines, less tire wear, more time in between oil changes, and generally putting less of a burden on the car as a whole. That means less spent on gas and maintenance costs, not to mention you’ll likely keep your cars longer—which means eventually not having a car payment (or at least a few years of no car payment until it’s time to get a new car).
Also, if you have a significant other, you might decide to reduce your number of household vehicles, as it might be less likely that you’ll both need to drive to different places at the same time. That’s one less vehicle charging you for auto insurance. While your mileage may vary on your overall savings, it’s likely your transportation costs will decrease to some extent.
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4. Taxes
While not 100% true 100% of the time, the majority of Americans will pay less in taxes in retirement. And there are a few reasons why.
For one, you likely will drop into a lower tax bracket as you shift from earning income from a standard salary to drawing income from retirement accounts and Social Security.
If you’re making withdrawals from a Roth account, you won’t be taxed at all as long as you’re age 59½ or older and have had the account for a minimum of five years. Depending on which state you live in, you might not have to pay state taxes on Social Security benefits. (And there are several other legitimate, legal ways to avoid taxes on your Social Security benefits.)
Housing taxes can be cheaper too. Some states offer property tax breaks to seniors; and if you downsize your property, that might also lower your taxes.
Plus, once you reach age 65, you’re entitled to an additional standard deduction.
Related: Federal Tax Brackets and Rates for 2024 + 2025
5. Clothing
Unless you’re moving to a nudist colony, you’ll still need clothes in retirement. But there are several reasons you’ll likely be able to reduce your clothing budget in retirement.
Most obvious: You won’t need a work wardrobe. That means no need for suits, dresses, and other work-mandated outfits (though you’re certainly welcome to keep dressing snazzy if you wish), nor will you be required to have any special job-related equipment, such as steel-toed boots.
Also, as you get older, you’re less likely to concern yourself with fashion trend changes—instead, you’ve usually built a capstone wardrobe with quality pieces you love.
And given that you’ll likely have more time on your hands during retirement, you should have an easier time shopping sales or even getting into thrift shopping. (Another bonus: Many stores offer senior discounts!)
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6. Education
If you want to get a college degree or even a professional certificate, for the most part, that education is going to cost you. You might be able to have your employer comp those costs if your job requires you to stay up-to-date on the newest technology, research, or theory in your field. But for the most part, people are on their own.
That is, of course, until you reach senior age.
And hey—let’s say you’re a lifelong learner and want to keep taking courses! Well, guess what? Seniors have a wealth of ways to keep enjoying an education at either a discounted rate or outright free.
Almost every state has at least one tuition-free state university program for seniors. Even the exceptions—Arizona, Idaho, Indiana, and South Dakota—provide steep senior discounts on tuition programs for people of retirement age. The minimum age for free tuition varies by state, but they are all within the range of 55 to 65.
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7. Entertainment
Some retirees are purposely frugal during their working years so they can live more lavishly in retirement. However, older adults, on average, spend less on entertainment than their younger counterparts.
According to 2021 Bureau of Labor Statistics Data, Millennials spent an average of $3,455 and Gen X spent an average of $3,872 on entertainment. Meanwhile, the averages for Baby Boomers and the Silent Generation were only $2,539 and $1,486, respectively.
Part of this can be attributed to the fact that there are many free and discounted entertainment options for senior citizens, such as senior center activities and low- (or no-) cost entry to national parks.
Additionally, many retirees simply prefer cheaper activities. For example, while younger people might want to go out to bars, where they charge a massive premium on drink costs, older adults often prefer to drink in the comfort of home—a much cheaper (and safer!) option.
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8. Housing
If in retirement, you continue to live in the same residence you did during your working years, your housing costs won’t necessarily go down—unless, of course, you pay off your mortgage when or after you retire.
However, many adults decide to downsize their homes or otherwise move to a cheaper place during retirement. And that can definitely drive down costs.
The 2022 Home Buyers and Sellers Generational Trends Report by the National Association of Realtors Research Group shows that homebuyers age 57 and older were more likely to downsize (both in terms of price and size) than to upsize. Downsizing can reduce your property taxes, mortgage payments, insurance, and maintenance costs.
You might have lived in or near an expensive city to keep your commuting time down for work, but once your employment ends, you might have nothing holding you near that city. In fact, many people don’t just switch cities—they move to a more affordable state, preferably one with favorable tax treatment for seniors.
It’s also worth noting that low-income, apartment-dwelling seniors can sometimes get subsidized housing, which is often based on 30% of one’s income. However, if locations near you are at or above capacity, you might be placed on a waitlist for months—or even years. In this situation, older adults with limited incomes should talk to a housing counselor in their area.
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9. Travel
Oh, some retirees certainly take longer, more extravagant vacations than they did during their working years, and as a result, they spend much more on travel during retirement. However, if you’re strategic, you can probably travel more affordably after you retire—and in fact, people often spend less money on holidays than they anticipate.
Related: 8 Ways Travel Can Be More Expensive for Seniors
A major factor here is the time of year you’re traveling. Some jobs have blackout dates when employees can’t take off from work. People with children often revolve their vacations around when schools have a break. But, in retirement, those restrictions are gone. And traveling outside of a destination’s peak season can save you a substantial amount of money. Depending on the study, people traveling outside of peak season enjoy 20%-25% in cheaper airfares on average, and anywhere between 15%-50% less spent on lodging accommodations.
Plus, senior citizens often qualify for discounts from hotels, railways, rental car companies, and other travel services.
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10. Coworker Gifts + Donations
Jobs come with certain social expectations. At some companies, one of those expectations is to give presents to coworkers. Data provided to Statista shows that in 2021, U.S. workers planned to spend an average of $25 on holiday gifts for coworkers.
OK, that’s not much—but holidays aren’t the only time people feel pressured to give money to coworkers.
Whether as a way to offer congratulations or condolences, at some jobs, staff members are often asked to pool money for a coworker. Then there can be requests to buy Girl Scout cookies or Boy Scout popcorn. And once you’ve established a pattern of contributing, it can seem rude to suddenly stop.
Contributing $10 here and there to new moms, $20 for the grieving coworker, and another $10 toward a retirement present—it’s a little each time, but it definitely adds up. Once you’re retired, however, many of those obligatory gifts and donations go away. You can then focus on only gifting to people in your inner circle.
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How Much Do I Need to Save for Retirement?
It’s useful to know what expenses will likely cost more or less during retirement, but that doesn’t tell you overall how much you need to save. Like so many questions in life, the answer is “it depends.”
When calculating how much money you’ll need, you’ll need to consider expected retirement age, location, and desired lifestyle, among other things.
Each situation is unique, but it’s commonly suggested to estimate you’ll spend 80% of your pre-retirement annual income each year. This assumes you aren’t retiring with credit card debt or other high-interest loans. You can always talk to a financial advisor about the best amount to save based on your financial situation and plans.
If you’re looking for more direction, you can check out our guide on how much you should save for retirement (by age group).
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