In retirement, expenses that typically decrease include work-related costs (commute, professional attire), housing-related costs (mortgage, potentially downsizing), transportation (less gas, insurance), savings contributions, and child/dependent care, while some discretionary spending like travel might shift or decrease over time, though healthcare needs often rise, note Kiplinger, US News Money, and Baird Wealth.
Expect to spend 55%–80% of your current income annually in retirement.
Even without a mortgage, retirees still face significant costs like property taxes, homeowners insurance, utilities and ongoing maintenance.
In general, you don't need to pay NI after reaching State Pension age, but there are a few niche scenarios where you might still pay National Insurance after 66: If you're below State Pension age: Even if you've retired early, you still owe NI on income until you reach the qualifying age.
No more payroll taxes
Payroll taxes (or self-employment taxes if you were a self-employed individual) are one of the main types of tax that are no longer paid in retirement.
The $1,000 a month rule is a retirement guideline suggesting you need about $240,000 saved for every $1,000 per month in desired income, based on a 5% annual withdrawal rate (5% of $240k is $12k/year, or $1k/month). It's a simple way to set savings goals, but it doesn't account for inflation, taxes, or other income like Social Security, so it's best used as a starting point, not a complete plan.
5 retirement mistakes to avoid
Moynes refers to as the 3 D's: depression, divorce, and cognitive decline. This period can be incredibly challenging as retirees struggle to find a new sense of purpose and direction without the familiar structure of their careers.
Healthcare - Since the cost of healthcare continues to increase, remember to account for the cost of co-pays, vision and dental care and medications. Estimate high – it's likely you'll need medications in retirement that you don't take now. Transportation - Your car probably won't run forever.
The average retiree's monthly expenses in the U.S. hover around $4,600 to $5,400, with younger retirees (65-74) spending more, often over $5,000 monthly, while those 75+ spend closer to $4,400 as transportation and entertainment costs decrease, though healthcare costs can rise, with housing, transportation, healthcare, and food being the biggest categories.
How many Americans have $500,000 in retirement savings? Of the 54.3% of U.S. households that have any money in retirement accounts, only about 9.3% have $500,000 or more in retirement savings.
Housing. Housing is likely to be your biggest cost in retirement. Many retirees think when they pay off their home, the house payment goes away but property taxes, insurance, and escrow fees never do.
Trap #1: Not Spending Enough in Retirement
Despite having more freedom and time, many retirees are burdened with uncertainty about whether they can afford the lifestyle they desire. The fear of outliving their money can hold them back from fully enjoying what should be some of the most fulfilling years of their lives.
You can retire comfortably on $3,000 in monthly income by choosing to retire in a place with a cost of living that matches your financial resources. Housing costs are the key factor. These tend to be both the largest component of a retiree's budget and the costs that vary the most according to geography.
One of the most common mistakes that older adults make is assuming they don't have to file taxes. Since most retirees don't have W-2 income, they think they aren't required to file.
Frequently asked questions about state retirement taxes
As of 2025, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no individual income tax. New Hampshire is phasing out its tax on interest and dividends and expects to become a no-income-tax state by 2027.