Most Americans Plan To Spend Less Than $2,000 a Month in Retirement — Are They Being Realistic?
According to a recent survey conducted by GOBankingRates, a surprisingly high percentage of Americans plan to spend less than $2,000 per month on retirement. While 29% plan to spend less than $1,500 per month, 29% also plan to spend between $1,500 to $2,000 monthly. In other words, nearly 60% of Americans plan to live off a monthly retirement allowance of $2,000 or less. This trend prompts a crucial question: Is this goal realistic?
Let’s explore what experts say about living on less than $2,000 per month in retirement.
Generations and Retirement Expectations
Gen Z and Gen X make up the majority of those who believe that living on less than $2,000 is possible during retirement. The survey showed that 41% of Americans ages 18 to 24 expect to spend less than $1,500 monthly in their golden years. The second-largest group, comprising 29% of those ages 25 to 34, also expects to spend less than $1,500 per month.
This frugal retirement expectation isn’t limited to younger generations. Among those planning to spend between $1,501 to $2,000 per month, Gen X leads the way, with 34% of Americans ages 45 to 54 falling into this category. Interestingly, this expectation is more prevalent among women, with a staggering 31% of women planning to spend between $1,501 to $2,000 per month during retirement.
Few Americans Plan To Live Off More Than $2,000 Monthly During Retirement
While it may be surprising, many Americans plan to live off relatively small budgets in retirement, with few aiming for more substantial monthly expenditures. The survey reveals that 14% of Americans plan to spend $2,001 to $2,500 during retirement, while a mere 9% expect to spend $2,501 to $3,000 monthly. Additionally, 10% plan for monthly expenses ranging from $3,001 to $4,000, while just 5% are prepared to spend $4,001 to $5,000 monthly.
As retirement monthly spending increases, the percentage of Americans planning for it significantly decreases. A mere 3% anticipate spending $5,001 to $7,500 per month, and only 2% expect more than $7,500 a month.
Experts Express Doubts About Living on Less Than $2,000 Per Month
“Not sure where the $2,000 comes from…but it’s not even close unless the person is a recluse,” said Wayne K. Maslyk, CFP and CEO at Great Lakes Benefits and Wealth Management.
According to Maslyk, living comfortably on less than $2,000 per month during retirement is challenging. He emphasizes that even with a paid-off house, essential monthly costs can amount to about $1,200 per month. This includes expenses like utilities, internet, insurance, property taxes, maintenance and improvements.
Maslyk breaks down various monthly expenses that people need to consider in their retirement budgets:
- Auto expenses (fuel, insurance, repairs, maintenance): $200 to $1,000
- Groceries: $400 to $800
- Clothing: minimum $50
- Personal care expenses (gym, hair, nails, chiropractor, etc.): minimum $50
- Health costs: minimum $200
- Lifestyle (dining out, entertainment, sports, etc.): minimum $200
- Vacations: $0 to $1,000
- Giving (church, charities, etc.): $0 to whatever
- Gifting (birthdays, holidays, weddings, graduations): $0 to whatever
- Pets (grooming, food, vet bills, etc.): $100 to $500
“If you add up just the minimums on these items, it’s over $2,000! When you add in the variables (non-hermit type living), it’s way over,” Maslyk said.
Retirement Under $2,000 Can Be Fulfilling
Retirement isn’t a one-size-fits-all experience. If a frugal lifestyle aligns with your preferences, embracing a retirement lifestyle with a monthly budget of under $2,000 can be deeply fulfilling. Your retirement journey should reflect your unique goals and values.
Living on a monthly budget of around $1,500 might involve relocating to a more affordable city, gardening or growing your own food and embracing a minimalist lifestyle centered around community-driven experiences while cutting back on dining out and personal expenditures. While the idea of living on $2,000 per month might seem daunting to some, for others, it can lead to a comfortable and content, albeit simpler, retirement.
While this journey might not work for some, others may find it fulfilling.
Accurately Assessing Your Retirement Needs
To determine whether retiring on less than $2,000 per month is feasible, assessing your current spending habits and anticipating future needs is crucial.
Track Current Expenses
“Analyze current spending habits to identify areas where adjustments can be made during retirement,” said Tammy Trenta, CFP and CEO of Family Financial, an asset management firm based in Los Angeles.
Take a close look at where your money goes today, considering categories like housing, transportation, groceries, entertainment and more. Understanding your current financial patterns will help you identify areas where adjustments can be made to align your retirement budget with your lifestyle expectations. Keep in mind that your location, intended travel plans and personal spending habits will significantly influence your retirement expenses.
Consider Future Needs
When planning for retirement, it’s essential to anticipate how your expenses might change in the future. Consider factors such as the potential for long-distance family visits, extended travel plans, or increased healthcare expenses as you age, according to Trenta.
Additionally, think about whether you might need to provide financial support to family members in the future. By factoring in these evolving needs, you can create a more accurate and flexible retirement budget that accommodates various life scenarios.
Seek Professional Guidance
“Engage with a financial advisor who can assist in developing a personalized retirement budget based on specific goals and circumstances,” Trenta said.
Planning for retirement can be a complex and daunting task, and you don’t have to go through it alone. Financial advisors can help you navigate the intricacies of retirement planning, from optimizing your retirement accounts like 401(k) planss or IRAs to understanding your social security benefits. Talking to an advisor can help you determine if you need to increase your savings rate to your savings accounts or if you need to delay retirement or work.
Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between Sept. 5 and Sept. 7, 2023, asking fifteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need in retirement?; (3) How much do you spend or expect to spend monthly during your retirement?; (4) If you aren’t yet retired, how much do you expect to get from Social Security during your retirement?; (5) How much of your retirement do you plan to fund with Social Security?; (6) At what age did you or do you plan to claim Social Security benefits?; (7) Did you or do you think you will have to move to afford your retirement?; (8) Which of the following proposed Social Security solutions do you think would work best to prevent the trust fund from being depleted?; (9) What sources of income will you have in retirement? (Select all that apply); (10) How confident are you that you will have saved enough to afford retirement?; (11) If you retired early, at what age did you retire?; (12) Are you counting on help from your family (financial, housing, long-term care, etc.) to afford retirement?; (13) Do you think retiring around age 65 is financially possible for most Americans?; (14) What worries you financially about retirement? (Select all that apply); and (15) If you got a stimulus check in the last two years, how much of the money did you save for retirement? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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