The Average Middle-Class Retirement Budget at Age 70 Compared to Age 80
When planning retirement finances, many assume the income needed at age 80 will be similar to that at age 70. Andrew Lokenauth, founder of the blog Fluent in Finance, points out that this assumption may cause retirees to either spend too much in their early retirement years or save excessively without using the funds. He describes both situations as undesirable.
Lokenauth suggests thinking of retirement spending in three phases: from 65 to 74 years old as a period of high spending, from 75 to 84 as moderate spending, and 85 and older as low spending. He advises retirees to adjust their withdrawal strategies to fit these phases.
At age 70, middle-class retirees typically spend about $5,400 per month, or roughly $65,000 a year. This level of spending is similar to what they experience at age 65, reflecting an active lifestyle with stable major expenses.
By age 80, monthly expenses tend to fall between $3,500 and $4,300. This change represents a 19% to 34% decrease compared to spending at age 70. The reduction in expenses speeds up after age 75 due to declining mobility and a simpler lifestyle.
Lokenauth emphasizes that most financial advisors do not highlight this spending decline between 70 and 80. Understanding how spending patterns change over time can help retirees manage their savings better and plan withdrawals more effectively for each phase of retirement.
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