There’s a popular belief that expenses go down in retirement. After all, you’re no longer commuting, buying work clothes, or shelling out for the kids’ education. It sounds simple: less work, less spending.

But in real life, that’s not always how the math plays out.

Why the 70–80% Rule Falls Short

You’ve probably heard the rule of thumb that says retirees need 70–80% of their pre-retirement income. While it’s a helpful starting point, it doesn’t paint the full picture. That figure doesn’t account for rising costs in other areas—especially the ones that sneak up on you over time.

Think about it: in the early years of retirement, many people want to travel, pick up new hobbies, or finally take that once-in-a-lifetime trip. These aren’t cheap. And as time goes on, new costs emerge—most notably, health care.

Hidden Costs That Creep In

Here’s what often gets overlooked:

• Health care inflation: A healthy 65-year-old couple may need over $300,000 in today’s dollars to cover future medical expenses. And that’s assuming no surprises.
• Longevity risk: Retiring at 65 may mean budgeting for 25–30 years of income. That’s a long time to stretch your nest egg, especially if costs rise.
• Lifestyle spending: Retirement often starts with a burst of activity. Dining out, traveling, hobbies—these can add up, especially early on.
• Unexpected obligations: From helping adult children to home repairs, many retirees face costs they didn’t plan for.

Taxes and Technology: The Modern Wildcards

Many retirees are surprised to find that their taxes don’t drop as much as they expected. Withdrawals from traditional retirement accounts are taxed as ordinary income—and depending on how much you’re pulling out, your tax bracket may not shrink at all.

And let’s not forget modern expenses: streaming services, smartphones, apps, cloud storage—all recurring costs that didn’t exist a generation ago.

Inflation Doesn’t Retire When You Do

Even modest inflation can erode purchasing power significantly over decades. A grocery bill that feels manageable at 65 might feel crushing at 85. Without adjusting for inflation, even the best retirement plan can fall short.

Retirement isn’t always a season of reduced spending. It’s a shift—sometimes a costly one. The key isn’t just spending less, but spending smarter and planning proactively.

We are an independent firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.