Top 5 Expenses That Could Go Up in Retirement

Playing with FIRE

A few weeks ago, I celebrated the Top 5 Expenses That Go Down in Retirement. Every dollar you don’t spend when retired is $25 to $33 you don’t need to set aside for retirement. Drop $10,000 in expenses and your required nest egg is at least a quarter million dollars smaller. Awesome!

But… there’s a not-so-awesome part.

Some expenses go down, sure. Others will remain roughly the same. Some spending categories, though, can unfortunately be expected to go up.

Ay, there’s the rub. Every $1,000 you plan to spend per year requires roughly an extra $25,000 to $33,000 in savings to support it (based on a 3% to 4% withdrawal rate).

As was the case when we looked at costs dropping, none of these will apply to everyone, but it’s a good idea to think about your own expenses and how they might change in retirement. To me, these are some of the top culprits that could bust your budget when you leave the traditional workplace behind.


The Top 5 Expenses That Could Go Up in Retirement


1. Healthcare


For many, health insurance is at least partially paid for by an employer. In retirement, you’re on your own until Medicare kicks in at 65, and even then you’ll probably purchase Medigap insurance and perhaps prescription drug coverage.

As our bodies age, they tend to need more maintenance and repair work. Early retirees can expect to visit the good doctor more often in their fifties and early sixties than they did in their thirties and forties. The insurers and their actuaries know this and price your coverage accordingly.

There may be options to mitigate an otherwise meteoric rise in this line item in your budget. Health sharing ministries have become more popular in recent years, and the purchase of a catastrophic plan is now allowed without an ACA penalty at any age. If you remain active and healthy and can afford most but not all out-of-pocket costs (think cancer treatment or extended ICU stay), a catastrophic plan could make sense for you.

Nonetheless, we’re budgeting $20,000 a year for healthcare coverage in the short term, understanding that the costs are rising faster than the rate of inflation, and even that number may be inadequate.


2. Travel


What do many people do with their newfound freedom in retirement? Explore the world!

Whereas you may have been confined to one or two quick trips during your working years, you now have the time to roam if you want to. While travel costs will probably drop off eventually, perhaps in your eighties or nineties, you could have decades of saying Yes to trips that you previously said No to because you were working.

Just going part-time, we’ve seen an uptick in our travel costs. We spent three weeks in Mexico not long ago, and we spent a few more weeks in Hawaii. We’ve also been to Honduras twice, and we travel as a family of four. If you start traveling more with kids, the costs can add up quickly!


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Again, you may find ways to keep travel costs from completely blowing your budget. You can travel at off-peak times, take advantage of last-minute bargains, and slow travel in a manner that doesn’t cost much more than your normal day-to-day. However, if you’re anything like me, you can expect the travel budget to grow in retirement.


3. Education


Education costs come in many forms. If you’re an early retiree, you may have yet to put your kids through college. If they will go through college after you stop earning an income, you’d better have planned ahead by funding 529 Plans or helping them apply for financial aid. If you have kids in elementary or high school, you may live in a location where private schools are commonplace and a  borderline necessity. Those are some expensive years!

If your children have completed all the paid education they’re ever going to get (or you don’t have children), you may still incur some education expenses in retirement. You may want to learn new skills, and choose to buy some education via community ed, community college, or possibly pursue a full-fledged degree at a university.

With time on your hands, the desire to learn something new may be stronger than ever. You may be able to audit classes for free and get your books at the public library rather than Amazon, but don’t be surprised if your education costs are increased in retirement.


4. Purchases


If idle time leads to in-person or online shopping, your credit card could get a real workout in retirement. Even if you don’t consider yourself to be a shopper, that doesn’t mean you won’t spend more money on stuff when retired.

Maybe you’ll pick up a new hobby.

Photography — gotta get the latest camera body and lenses.

Golf — You’ll spend more on the experience and the equipment

Hunting and fishing. Did you know that an ice auger and Vexilar can set you back over $1,000 before you cut your first hole in the ice? And this is the kind of fishing that doesn’t even require a boat!

With more time on your hands, you’ll find new things to do. And some of those will undoubtedly cost money — money that you weren’t spending when you were too busy working.


5. Gifts


The rising costs of gifts in retirement can be expected to come in two forms: to other people and to charity.

The older you are, the more relatives you’ll probably have to buy gifts for. As a kid, you probably gave gifts to your parents and siblings. As a young adult, you might have added nephew, nieces, and perhaps children of your own.

As a retiree, you may see your kids have kids. And those kids can have kids (once they’re no longer kids, of course). You could have a large bevy of grandchildren and great-grandchildren. That’s a lot of birthday and Christmas gifts!

As you mature in age and your portfolio matures with it, unless you encounter a particularly poor sequence of returns in the early retirement years, you could find yourself with a portfolio that greatly exceeds your needs. In fact, according to the Trinity study, the median outcome after 30 years is to nearly triple the money you started with.  This is a good problem to have, and you may be inclined to share the wealth, as we have done preemptively with a sizable donor advised fund.

You’ve probably noticed that most big benefactors of charitable organizations tend to be a lot older than you. Their hard-earned dollars have benefitted from the magic of compound interest, and they are doing some good with the abundance. Perhaps it will be you holding up the oversized check one day.



The Retirement Smile


We’ve talked about expenses that are likely to drop in retirement:

  • cost of commuting
  • retirement savings
  • taxes
  • mortgage
  • raising children
  • professional clothing


Now, we’ve touched on expenses that could rise in retirement:

  • healthcare
  • travel
  • education
  • purchases
  • gifts


What’s an aspiring future retiree to do?


First, understand that your future expenses will probably not be the same as they are now. Whether your future life will be cost more, less, or about the same depends on the stage in life you’re currently in, and how the above factors or others will affect you personally.

Of course, it’s impossible to guesstimate your future spending if you don’t know your current spending, so it’s important to have an idea of what that looks like. I used to have a rough idea, but after I started a blog, I decided to track our spending more closely. In 2016, we spent about $62,000 and in subsequent years, that number didn’t change much.

It also helps to recognize the “retirement smile.” It’s not the sly grin you’ll be wearing on weekdays when most of the people you know are clocked in — well, it could be — but I’m talking about the spending pattern that most people will see in retirement.

Wade Pfau, Ph.D., CFA, the Retirement Research, explains it well in this post based on David Blanchett’s work at Morningstar. The average retiree can expect to see expenses drop in the years after retiring at 65, and the trend typically continues downward until the early 80s when healthcare spending begins to rise.


Retirement Smile


The resulting downslope followed by an upslope gives you a sort of “smile” when plotted along a timeline. At some point, there just isn’t much more you want to purchase. You may run out of places you’re excited to explore or lack the energy and physical capacity to do so. Eventually, the cost of nursing homes, procedures, and hospital stays more than make up for the difference if you make it to that stage of life.

This post begins and ends with the cost of healthcare. I suppose that’s appropriate.



What expenses do you foresee rising when you retire? Any or all of the above? Do you have a number 6?


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64 thoughts on “Top 5 Expenses That Could Go Up in Retirement”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. You have some good points. We now have no mortgages but instead we are spending on replacing the roof of two houses before I retire, I only commute 12 miles on rural roads so commuting isn’t a big expense. I just replaced my age old Mitsubishi with an expensive German car and paid extra for extended warrantee so that we have no maintenance costs for 7 years. We should have all that paid off in a year. All in preparation for retirement. With future inflation there is no better time than the present to pay for these things. We talked about building an extension to our house so that we have all facilities on one level in case of mobility issues in retirement but decided it wasn’t worth the expense for a “maybe”.

    I am not anticipating a huge decrease in the tax bill. While working we put money tax free into 401K plans. That decreased tax while I was working. Now if we were to take it out of the 401K to maintain the same income, the tax would be the same as when I was working. However, as you point out it is likely that our expenditure will decrease and tax will decrease with it.

    Like you we continue to plan to travel, especially to New Zealand where we have a house. I see you have plans to go to NZ as well. We hope you really enjoy the trip. Take your time. Rent a car or camper and drive around for 6 weeks or more. The exchange rate fluctuates but Air BnB seems very reasonable when you convert it to US dollars. Petrol (that is gas) is about 4x the price it is here but the distances you travel are shorter. There have been a lot of TV documentaries about NZ. There are some free videos available internationally on the web. I just discovered

    We are great believers in our airline credit card that gives you miles for dollars spent, and double miles spent on air tickets. This gives us a lot of free travel.

  3. Being a not-working person (aka “retired”), I can report my experience.

    Goes down: Health Insurance. Medicare is definitely much cheaper than commercial health insurance, even through an employer. At least it has been in my case.
    Not to say ongoing health issues may eventually have high costs, yes of course they will. But the initial insurance costs are lower.

    Goes down: normal fuel for the car. Not commuting daily means I fill up less often. l certainly get around.. errands, pleasure, touring, friends, etc., but the daily commute was a fuel burning exercise.

    Goes up: home utility costs. Now being home much of the time instead of being at a company office, we use more electricity and water and gas than we did before. On the other hand, I get to wear long underwear at home, which I never did at work, ha ha.

  4. I agree with all the points you have in your post. Just like the others, I am also worried about the healthcare factor. I now have a headache just thinking how it could affect my family and me in the future. It makes me nervous to face retirement just because of it. I envy those who have commented that they will be able to have free healthcare for life when they can complete certain years of working. Good for them, lucky them. Right now, I’m saving as much as I can and made some adjustments to our present lifestyle so we can make room for more savings to which I designated for healthcare alone. I’m also looking at Medicare supplement plans vs. advantage plans as early as now so that possible premiums will be added to my budget plans. Sigh. So many things to consider and so many things to accomplish. Hopefully, all these efforts will pay off in my golden years. Healthcare gives me pressure at its best.

  5. Great post. Number two – travel really resonates with me. I think one way to keep travel cost down, especially when traveling abroad is to find countries where the U.S dollar is strong right now (e.g. Portugal, South Africa, New Zealand, Singapore, Argentina and The United Kingdom) and go there during off peak season. That way, you can save even more, on flight, food, adventure and even shopping while there.

  6. Can’t argue with the list. The only one that makes me shudder is healthcare, of course. And to prepare for the worst, I’m learning all I can right now about medical tourism. Know any good physicians in Bangalore?

  7. Healthcare is the one that I worry about the most. The cost of healthcare is going up so much every year. The problem become even more complicated when you combine it with long term travel.
    Travel doesn’t worry me at all. The cost of traveling isn’t much more than the living cost in the US. I plan to sell everything before we leave. The cost become much more palatable if you don’t have to maintain a home in the US.

  8. I always assumed travel would be my biggest increase but after reading a lot about “travel hacking”, I am starting to think that with the extra time I will have, I may be able to travel hack a lot and spend the same or less on travel:)

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  10. I agree with both of your lists…the increases and decreases. Since we said goodbye to our jobs in 2015, our health insurance is our biggest financial unknown and one rife with landmines. An example…we learned last month that we aren’t covered beyond life-threatening medical attention any time we leave our state. Since we took 10 trips out of state last year…WHOA!

    Which brings us to #2. Our travel went up but we squeezed in all those trips, to some of the most expensive cities in the world, for less than $10K. There’s room in our reduced-spending life for it and I say we want to “walk the world while we can”.

    One of the things that scares me most is long-term care. We attended a seminar on it at an insurance company a few months ago. The agent said it would be so cheap for us given our age (49/50). After an hour with her, we learn it’s $4,000 a year. HA! (We didn’t buy it).

    After retirement, I reached out to a local university about auditing a class. They steered me to the professor who taught it. A quick email to him and I was in the class for free. As the only person in the room (other than the professor) who was of legal drinking age, I was a sore thumb. It was a blast. Learning for the love of learning is a whole new adventure.

  11. Very interesting, PoF! Being from Denmark, I believe especially travel (!), and purchases and gifts to some extent will go up in retirement for me. However, healthcare and education are free where I live, so I never worry about those. Of course, they are not entirely free as they are funded by the more than 50% income tax I am (happily) paying at the moment 🙂

  12. I’m actually not too concerned about any of the expenses that you listed. As long as we save up, it should be fine.
    1) Healthcare – If I say in my job till I’m 58, my wife and I (and my kids up to 25 years old) will have free healthcare for life. Not bad. 🙂
    2) Travel – Sure, travel expenses may go up because we will be traveling more. However, the cost per trip may actually go down. The world is getting smaller and it is easier than ever to travel the world. Online travel agencies have disrupted the travel industry, making it cheaper for everybody. And low cost carriers have driven down airfare prices of well-established legacy carriers (AA, United, Delta). I was able to score $400 flights LAX -> CDG (Paris) not too long ago and travel deals seem to get better and better. Then there is geographic arbitrage and the potential of living in a corner of the world that is safe, fun, yet cheap to live.
    3) Education – Sure, it may go up. But it may also go down. By the time I retire, perhaps my kid’s college tuition would be completely free. And why pay for education when you have great bloggers (like Physician on Fire 😉 providing free education that is useful, actionable, and entertaining!
    4) Purchases – This expense can easily be controlled. I don’t really buy much right now and I don’t anticipate buying anything superfluous when I retire
    5) Gifts – This expense can be controlled too, but shouldn’t necessarily be. It’s wonderful to be generous!


  13. Those are all valid costs. Healthcare is a major wildcard for many people who want to retire early. I could see all of these categories increasing for me. All except for the auger. I am a fair weather outdoorsman.

  14. My motorhome costs skyrocketed in retirement. It had been sitting for two years costing almost nothing and then I retired, did a bunch of deferred repairs and hit the road. A set of 6 new heavy duty truck tires is quite a chunk of change.

    The cost of managing my rental properties went up. As I began traveling more, I could not be the manager anymore and had to hire it out.

    My healthcare costs went way down as I switched to a Christian Medical sharing system and spent about $15k less per year.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

  15. Good summary. I’m an early retiree. My biggest challenge is the rising health care premium. It’s beyond my control. Another cost going up could be the utility bills, as I’m home most of the time. While working, I used to program the thermostat based on hours, now it’s set flat. Probably more water is used, as I’m a little bit OCD.

    • Healthcare is going to be the #1 concern for most of us. I hadn’t considered the cost of utilities. I figure ours will probably go down, as I expect we’ll be away from home for weeks to months at a time.

      It will be key to keep our fixed costs at home low so we can afford to live well while away.


  16. South Carolina offers free tuition for residents age 60 and older. So learning a new skill/hobby or exploring an interest in depth can be done inexpensively here!

  17. Great post, as always. I always wonder if expenses in regular retirement (age 65+) drop because retirees want to spend less because they have to spend less, considering how financially unprepared many retirees are.
    So, that smile chart might become a “smirk” for folks with the financial means. Normal consumption growth in the early phase where consumption is merely reshuffled (from commuting costs to travel costs) and then strong growth later when health care takes off and overshadows all declines in all the other categories.

    • “I always wonder if expenses in regular retirement (age 65+) drop because retirees want to spend less because they have to spend less,”

      My money is on the latter.

      If everyone received a $10 million dollar gift upon retirement, then clearly, spending would rise in early retirement.

      If everyone suffered a decline in income upon retirement (the usual case), spending would be expected to fall.

      • I think it’s probably both. My parents could spend far more than they do but they got to that point because they are naturally frugal (or learned to be frugal early on). They developed inexpensive hobbies like gardening, reading, cooking, exercising outside, and hanging out “debating” (aka bickering). They’re perfectly content continuing to do those things. They travel when they want to but that doesn’t really make a dent when you’re frugal in other areas (and never in a billion years would they consider a first class transatlantic ticket or staying in the ritz Carlton even though they could on occasion if they wanted to)

    • It’s hard to predict what ours might look like, but if we have anything but a terrible sequence of returns, I think we’ll be very well able to ramp up spending if we choose to after we’ve been retired awhile. Social Security will just be icing on the cake.

      I imagine you’re right regarding the average retiree who only has a few hundred thousand saved at most.


  18. Curious to know more details on how you arrived at $20k for healthcare as your annual budget. When i saw this number i got a sinking feeling i may have to work another 5 years to budget this into my retirement! Ugh!

    • Depending on the local market, $20K may be fine for a young family of four, but it isn’t nearly enough for a late 50s couple (no kids) in my market.

      Everyone realizes that healthcare costs have been rising much faster than CPI, but many younger folks don’t appreciate how much rates rise with age (holding inflation constant).

    • That’s about what we’re spending now as a family of four. My employer pays roughly $10,000 of my health insurance premiums, I pay $5,000 (pre-tax) and our out of pocket costs are another $5,000 or so on average. It seems somebody has a surgery or procedure every year. Those anesthesia bills add up!

      I did list a couple ways to mitigate those costs, and if you have taxable income on the low side, as most early retirees will, you can still qualify for an ACA subsidy… for now, anyway.


  19. Healthcare is a big one. If I stay at my current job until I am 59.5 then I get free health care for life…the other side is I will have to work for 22 + years to get there…time will tell but free healthcare sounds pretty sweet.

    • I have the same deal. My husband however (1 year older than me) can take his health insurance with him (and for me too) at age 55. Only 14 years to go. We could retire earlier than that if the future of healthcare wasn’t such a question mark. His job is pretty awesome in other ways too but sometimes you just want to be free to roam the world. So we’ll see. I wish sabbaticals were more common in the U.S. because that would be the perfect solution for us. I love most of my job and don’t want to stop for good but I loooove slow travel.

  20. Lunch

    I have been eating the free lunch in the doctor’s lounge for over 20 years. (On occasion, I will grab a mid morning snack.) Now, that I am part time, I will be paying for my lunch an additional 86 times this year. When I retire completely, that will be an additional 129 lunches to purchase (plus the 86).

    • On days that I don’t work, I find I do great on 2 meals a day. When I’m working I need 3 if I don’t want to get cranky (well, sometimes I’m still cranky but that’s another story). I think when i’m not working my adjusted sleep and exercise schedule makes me less hungry. So there’s that.

    • Good call, Vagabond MD. I listed “free food” as one of the things I’ll miss the most when I retire. I don’t get a whole lot these days, but when I was a locum at North Collier in Naples, they had an outstanding hot breakfast and lunch spread in the lounge. I couldn’t tell you about dinner, because as a locum, they always had me clock out at 3 pm, but I’m sure they served up some good food then, too.

      I’m usually on my own for lunch these days, but I’m usually eating leftovers or a lunch that I pack that is nearly identical to the one my Mom packed for me 35 years ago. Sandwich, apple, treat.


  21. If you want choice of doctors the annual cost of health care in retirement is $10,000+ for a couple when you include Medicare Deduction from Social Security, Medicare Supplement Insurance, Prescription Drug coverage, and co-pay for drugs. And then there is Dental, which is not covered under the above, and can often involve fairly expensive work for us “Active Adults.”

    All the above is for a 68 and 69 year old in good condition. . . And then there is the $1,000 plus per year for the YMCA to maintain that good condition.

    • Thanks. That’s useful information based on experience.

      It’s important to account for dental/periodontal. This may be trivial through middle age, but I have older relatives who have spent a fortune on that category.

    • Thanks for the insight, Sully. Also, I like the way you handle a plane.

      I have no way of knowing what our health care coverage is going to look like that far down the line, but I don’t imagine it will be any cheaper. That’s one of several reasons I’ve chosen to work “one more year” a few times now.


  22. Hmmm Ice Auger…. Hang on, I need to visit Amazon!

    Glad to see Actuaries get a shout-out, but boooh to rising medical costs! I need to find a good example of Actuaries actually decreasing costs for people.

  23. I like the physician philosopher’s acronym. PTRE because that is what I am doing. Expenses drop a lot because your house is filled with many years of purchases that do not need replacing every year.

    • Absolutely, hatton1. If you buy quality stuff, it will last years. Also, when you’re partially or fully retired, you’ve got more time to find the best deal. That’s true for both items and experiences. You can buy on sale and travel off-season / shoulder season.


  24. Health Care is my major concern for sure. I’d love to be plugging away into an HSA for this problem but my empolyer doesn’t offer one.

    I can also see that if I had loads of more free time I’d likely spend more time doing hobbies I love (that cost more money). This is why my plan is to go part time and focus on the things I enjoy when I can, rather than retiring completely. This will help mitigate some of these costs that you incur with full retirement. Maybe it should be called PTRE (like petree dish) for Part Time Retirement Early.

      • Can you elaborate on the HDHP and creating your own HSA. Not a physician but my husband is and I just came across this site while reading Money.. I’m going to pass along to him as quite interesting!

        • If you have health insurance that qualifies as a High Deductible Health Plan, you are eligible to start saving money in an HSA, whether or not your employer offers one.

          HSA Bank is a popular option for the investment options and low fees.


          p.s. Glad you found me from the Retire With Money newsletter. Cheers!

  25. So far in my semi-retirement I’m riding my bikes way more, climbing more, and doing more of the things I love. This is of course is causing more wear and tear on my outdoor gear. I went all of last year on purpose not buying any new outdoor gear but I’m quickly seeing that I probably won’t be able to keep that up. My gear costs will definitely rise.

    I will also travel more like you said. I already travel a decent amount but it will go up for sure. Not sure if it’ll be big stuff around the world as I’ve already seen much of the planet that I want to. I’m focusing now on continued exploration of the good ‘ole USA. There’s still lots of nooks and crannys I haven’t been to and many places I want to go back to.

    And btw, my favorite kind of fishing definitely does not involve an auger 🙂

    • You could spend years and years exploring the US, and I’m sure we will, but there are some cultural experience you simply can’t have without hopping the border. I never traveled for work like some people have, so I’m more eager than most to travel far and wide.


  26. I completely agree with your list as I’m anticipating all of those expenses to rise in the future. The only one that I’m really excited about going up is the Travel one. Selfishly I am looking forward to traveling around the world and seeing some of the things I wasn’t able to in my youth 🙂

    • Yes! I know we’ll be traveling a lot more. Hopefully, we can balance some of the more expensive trips out with some cheaper locales. Spend some time in New Zealand and hit up SE Asia while we’re in the neighborhood. Spend some time in Iceland on the way to and from Spain. That sort of thing.



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