How to Estimate Your Retirement Expenses

"How much will I spend in retirement?" is the question underneath almost every retirement plan. Savings targets, withdrawal rates and claiming ages all depend on it. This guide shows a simple way to build an estimate, what government data say about spending at 65 and older, and which costs are easy to forget.

This is general education, not personal advice. A tax preparer or fee-only financial planner can look at your full picture.

What is the simplest way to estimate retirement expenses?

Use your own spending as the starting point. The method has four steps:

1. Track what you spend now. Use 12 months of bank and card statements. One year captures things that do not happen monthly, such as car repairs, gifts and insurance bills.
2. Sort each line into three groups. Costs that will stop (commuting, work clothes, payroll taxes on wages), costs that will continue (utilities, food, insurance), and costs that will begin or grow (Medicare premiums, travel you have been putting off, help around the house).
3. Add taxes and health costs separately. Both change at retirement and are covered below.
4. Add a cushion for irregular items. Roofs, cars and dental work arrive on their own schedule. Many people keep a separate line for them rather than ignoring them.

The result is a yearly figure. You can compare it with your expected income from Social Security, pensions and savings. Our guide How Much Do You Need to Retire? shows what to do with that figure next.

What do people age 65 and older spend money on?

The U.S. Bureau of Labor Statistics (BLS) runs the Consumer Expenditure Surveys. Its Table 4500 for 2022 has a column for households whose reference person is 65 or older. The table below copies that column. We did not open a newer age table: the 2024 release we read has no figures by age, and the 2024 age file was a spreadsheet we could not read here.

Categories shown do not add to the total because the table has other lines we left out.

Three cautions before you use this table:

• It is an average of many households. The same column shows an average household size of 1.7 people and average income before taxes of $60,359. Your household may look very different.
• It is dated. The figures are for 2022. Prices have changed since.
• It describes spending, not need. Some retirees spend less than they would like because money is tight. Others spend more.

Use the table only to check whether any big category on your own list looks far too small or too large. If your housing line is a fraction of the average, ask why. You may own your home outright, or you may have left something out.

Which costs usually go away, stay or start?

There is no universal answer, but this table gives a way to think about each line. The "usually" column is our general guidance, not a finding from the sources above.

How much does Medicare cost in 2026?

Health costs deserve their own line. The Centers for Medicare & Medicaid Services (CMS) 2026 fact sheet, dated November 14, 2025, lists these Original Medicare amounts:

Multiplying the Part B premium by 12 gives $2,434.80 a year per person (our arithmetic). A couple would pay that for each of them.

Other points from Medicare.gov:

• Part B coinsurance is "Usually 20% of the cost for each Medicare-covered service or item after you've paid your deductible."
• Medicare.gov says there is no yearly limit on what you pay out-of-pocket in Original Medicare unless you have supplemental coverage, such as a Medigap policy, or join a Medicare Advantage Plan.
• Medicare.gov lists the Part D (drug coverage) out-of-pocket limit as $2,100 in 2026.

Higher earners can pay more. CMS says income-related monthly adjustment amounts (IRMAA) raise Part B premiums for higher-income beneficiaries, and that people with modified adjusted gross income of $109,000 or less (individuals) or $218,000 or less (joint filers) pay the standard $202.90. The page we read does not say which year of income is used, so check how the higher amounts apply to you.

What does Original Medicare not cover?

Medicare.gov's "What's not covered?" page lists items including most dental care, hearing aids and exams for fitting them, eye exams for prescription eyeglasses, and non-medical long-term care. These are costs you may need to budget for yourself or through other coverage. Prices and plan choices vary, so we do not give averages here.

How do taxes change your retirement budget?

Taxes do not disappear when paychecks stop. The pieces to list:

• Withdrawals from traditional IRAs and 401(k)s are generally taxable income (general rule, not drawn from a source cited here). Roth withdrawals follow different rules.
• Part of your Social Security may be taxable. The IRS Topic 423 (reviewed October 7, 2026) says benefits can be taxable when the sum of your modified adjusted gross income plus one half of your benefits is more than a base amount for your filing status. The SSA's Retirement Benefits booklet says about 40% of people who get Social Security pay income tax on their benefits, and that up to 85% of benefits can be taxed above its stated combined-income levels. The IRS page we read did not list the dollar thresholds, so use IRS Publication 915 or the Form 1040 instructions for them.
• State and local taxes differ widely. Check your own state.

Because the first two items depend on how much you withdraw, taxes and spending can feed each other. A larger withdrawal to pay a tax bill can create more taxable income. A tax preparer can model this for you.

A worked example with made-up numbers

Suppose a household spends $5,000 a month now, or $60,000 a year. After sorting the lines, it expects:

All numbers except the Part B premium are invented for illustration. The result is $61,869.60 (our arithmetic: 60,000 − 6,000 + 4,869.60 + 3,000). The household would then add income taxes and out-of-pocket health costs, and compare the total with its expected income.

A worksheet you can copy

Common mistakes when estimating

• Using a round percentage of income without checking it against real bills.
• Forgetting that Medicare premiums are per person.
• Leaving out taxes, or assuming Social Security is tax-free.
• Assuming spending stays flat. It can change as you age, in either direction.
• Not updating the estimate. Premiums and deductibles moved between 2025 and 2026, as the table above shows.

Where gold and silver IRAs fit - and where they do not

A gold or silver IRA is a self-directed IRA that holds physical metal meeting IRS rules. Our guide What is a Gold IRA? explains how these accounts work. Estimating expenses comes first. It tells you how much money you need and when, and that shapes whether any asset type makes sense.

Why some people consider them. Supporters commonly give three reasons (our summary, not drawn from a cited source): the metals are tangible, they may move differently from stocks and bonds and so may add diversification, and some see them as a hedge against rising prices. These are arguments, not guarantees. We do not predict prices, and past results do not promise future ones.

What the rules say. The IRS collectibles page says a plan account's purchase of a collectible is treated as a distribution, that the restrictions "also apply to IRAs," and that gold, silver, platinum or palladium bullion "of a certain fineness" is excluded from the definition "if a bank or approved non-bank trustee keeps physical possession of it." See our collectibles rule guide.

What it costs and what can go wrong. Dealer markups, custodian and storage fees, and selling costs reduce what you keep, and metal prices can fall as well as rise. See Gold IRA fees and Gold IRA risks.

Where they may not fit. A spending estimate is mostly about regular monthly bills such as housing, food, health and taxes. Metal in an IRA does not pay those bills until it is sold or distributed, and selling can bring costs and taxes. Please consider talking with a qualified tax or financial professional before moving retirement money.

Related questions

Should I use a percentage of my income instead?

Percent-of-income rules are quick checks. Our guide How Much Do You Need to Retire? covers them and their limits. A bottom-up list like the one above can confirm or challenge the percentage.

How much do other people have saved?

See Retirement Savings by Age for Federal Reserve survey data.

What should I do at each age?

Our retirement checklist by age lists steps for 50, 55, 60 and 65. For the full roadmap, start with Retirement Planning in 7 Steps.