How Our Spending Changed in Retirement

The data, analysis and conclusions presented simply reflect our experience. They are meant to be informative but not representative or predictive of anyone else’s situation.

When we retired in 2010, one goal was to spend less while at least maintaining our standard of living.

The bottom line is that our spending is averaging 25.3% less per year in retirement. The drivers of this have been paying off our mortgage and lowering our taxes. Even when I remove the effect of a mortgage, our annual spending still averages 14.5% less in retirement.

As you know, spending patterns change after you stop working. The following table shows how our spending has changed. It is based on personal spending data from our pre-retirement years (2001 – 2010) and from our retirement years (2011 – 2015). Expense categories are listed in order of largest annual expenditures to lowest. For example, a change in mortgage expense has a more effect than a change to dining out on our actual spending.

Expense Category Change in Retirement Spending By How Much
Mortgage Decreased -100%
Home related [i] Increased +57.9%
Taxes Decreased -77.4%
Travel Increased +53.7%
Auto related Decreased -56.7%
Utilities[ii] About the same 0%
Medical Increased +43.1%
Personal spending Decreased -14.0%
Eating out Decreased -15.8%


Our home related expenses increased because we had to make significant (i.e. costly) home improvements to our new house. These expenses are decreasing but those “savings” will be offset by the need to replace an aging car. (There’s always something.) Travel is our number one discretionary expense. It’s gone up because of the commitment we made when we moved to return to the Bay Area for all family events. Medical has increased because we no longer get health insurance through our employer. I anticipate that our taxes, medical, insurance and utility expenses will continue to creep up. My biggest concern is the risk of our medical expenses rising dramatically. We might be able to mitigate that risk somewhat by reducing our discretionary spending (e.g. travel) but it is still a concern.

The obvious conclusion is that we’ve been able to reduce our living expenses by getting out from under our mortgage and by significantly lowering our taxes.

The next table looks at some common expenses and compares whether the expense is less expensive in Arizona vs. California.

Expense Category Specific Expense Which State Is Cheaper Notes
Taxes Property tax AZ About 50% less
  Income tax AZ About 50% less
  Sales tax About the same  
Home related Insurance AZ  
  Groceries About the same  
Auto related Drivers license fee AZ Very cheap in AZ
  Registration CA About 25% less
  Insurance CA Zip code dependent; AZ has issues with red light runners
  Gas AZ At least 50 cents less per gal
  Maintenance About the same  
Utilities Gas & electric AZ We use more electricity for AC but cost per KWh is less
  Water & sewer AZ Water is much cheaper
Medical[iii] Insurance AZ  
  Care About the same  
Eating out Restaurants AZ  


You can see that based on our data and analysis, we have met our goal to lower our cost of f living.  I can also state that not only have we maintained our standard of living but that we’ve actually improved it which only makes our decision to relocate all the better..

Please feel free to share your experience in “Leave a Reply”/

[i] Home related expenses include repairs, maintenance, insurance and improvements.

[ii] Avg utilities are difficult to compare because the mix is different. In general, electricity costs more in AZ and gas, water and sewer are cheaper in AZ.

[iii] Refers to the cost of insurance in the private market

You may also like...

2 Responses

  1. Albert Jeans says:

    Hi Ted. Retirement planners often say you wiil need at least 75% of your maximum pre-retirement pay to maintain your lifestyle. Has that been true in your case? Our spending was probably only about 25% of our take-home pay before I retired.

    • tedcarr654 says:

      Our planning has focused on the expense (lifestyle) side of the equation. We didn’t consider our income as the key to figuring our what we should expect to spend in retirement. I think that there are too many variables in that rule of thumb to make it applicable to a broad audience. Here are two quotes from an article entitled: Retirement Spending: Why Rules of Thumb Don’t Work. (
      1)“The origin of the rule of thumb was that if you wanted to replace your pre-retirement income, the figure to hit was 70 percent,” he says. “It just referred to the actual income workers take home after adjustments for payroll and income taxes, retirement account contributions, and miscellaneous work expenses, like business clothing and commuting. It wasn’t about a spending ratio when it was first invented, but at some point it morphed into that.”
      2)The rule also is problematic for anyone struggling to achieve retirement in a hard times economy, because it doesn’t start with the right questions: What lifestyle will you want–and be able to afford–in retirement? What will you need to spend on non-discretionary items, like food, shelter, transportation, and utilities? What discretionary spending do you really expect?

      I invite you to check out an early post of mine: How Much Income Will You Need to Live On? You’ll see that I agree with 2) as the best way to answer the question.

      Hope this helps.

Leave a Reply

Your email address will not be published. Required fields are marked *