Retirement Retired Life

Retirees Should Cut These 8 Expenses To Save up to $40K a Year

These spending categories cost retirees thousands each year.

By Josh Koebert , Edited by Laura Hohenstein

Updated June 13, 2026

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Nowadays, for many households, rising costs are making it harder and harder to stretch savings as planned. And while you may think retirement should equate to financial freedom, the truth is, retirees are also falling into this category. According to data from the U.S. Bureau of Labor Statistics (BLS), households composed of retirees spent an average of $61,432 in 2024.

While inflation continues to be present in our lives, many retirees find themselves carrying the burden of expenses that fit their lifestyles in their pre-retirement days but no longer fit that bill. But the good news is that meaningful savings don't always come from clipping coupons. Sometimes the biggest opportunity is rethinking those high-cost structural expenses, which could merit up to $20,000 to $40,000 a year in savings and could free up your retirement budget.

Editor's note: All spending data comes from the BLS, unless otherwise stated.

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Housing

Housing is the largest expense for retirees, clocking in at $22,193 per year. Housing in this list includes items like rent/mortgage payments, property taxes, insurance, utilities, and maintenance/repairs.

To reduce your housing expenses, things like downsizing or relocating to a lower-cost state could help. You could also consider refinancing your existing mortgage (if it makes sense).

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Transportation

Transportation is the second-largest expense, with the average retiree household spending around $9,538 annually. Things like car payments, car registration fees, insurance, fuel, and routine maintenance inflate this number. Retirees also sometimes have more vehicles than they actively need.

Things like eliminating a second vehicle, or shifting to a simpler transportation setup if you live in a less car-dependent place, could help you cut back several overlapping costs at once.

Food

Next on the list: Food. Retiree households find themselves spending roughly $7,940 per year on things like groceries and dining out. While groceries are essential, dining out and quick convenience spending could really add up over time.

Making small adjustments like reducing the frequency with which you eat out, meal-prepping, and cutting out things like delivery services could make a meaningful impact without really harming the day-to-day quality of life.

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Health care

Another surprising chart-topper? Health care. These costs average around $7,799 per year and include things like insurance premiums, prescriptions, medical services, and medical supplies.

While health care costs are unavoidable, there are options. Consider reviewing (or switching) Medicare plans during the annual open enrollment (October 15 - December 7).

Personal insurance and pensions

The next category could persist into retirement, and costs retirees around $3,480 annually. Life insurance is very often unnecessary post-retirement, especially if your dependents are financially independent and your debts are paid. Many retirees may find themselves continuing to pay for these policies, which are designed to protect their income in the working years.

So, reassessing coverage needs could reveal unnecessary premiums, allowing you to put that money elsewhere.

Cash contributions

Cash contributions, which in this category include money given directly to charities, religious organizations, or family/friends, add up to $3,158 annually for retirees. While it's a good thing to give to causes (and people) you love, it's important to never do so at your own financial detriment.

Lots of these giving habits also form before retirement, so consider reviewing donations to see if there is an alignment with your income in your golden years.

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Entertainment

Brace yourself for this next one: sometimes those pleasures in life could be costly. Entertainment and other recreational spending weigh in at around $3,025 annually for retiree households.

This category includes things like streaming services, subscriptions, and events. It's ever so important to maintain a quality of life, but always remember to evaluate duplicated or underused services.

Streaming and subscriptions are one example of something to cut back on. Regular cable bundles with TV plus internet and possibly your phone could run around $187.99 a month, according to JD Power, and cutting that alongside streaming services (which stream the same shows) could save over $2,000 a year.

Personal care and apparel

Lastly, apparel and personal care add up to almost $2,000, with apparel sitting at $1,198 and personal care at $782 annually. Included in these categories are things like clothing, grooming, and other related services (think haircuts/styles, nail appointments, massages, etc.).

In retirement, these costs may decline naturally, but many may find themselves maintaining the habits from peak working years. Like with previous categories, take the time to review your wardrobe and personal care needs. Small adjustments in this category could make quite an impact.

Bottom line

In your golden years, most budgets don't fail because of one big mistake. Instead, it's the handful of familiar and recurring expenses that we forget to re-evaluate after leaving the workforce.

Things like housing, transportation, insurance, and subscriptions may stay on autopilot. Even if the reasons for carrying them no longer apply to your new retirement plan in the same way.

The key takeaway is that the most meaningful savings come from restructuring, not sacrificing. By aligning your current needs with spending (instead of past obligations), retirees could net up to $20,000 to $40,000 in savings. Coordinating changes in Medicare enrollment, insurance adjustments, and considering relocation could accelerate savings faster than tackling each category one by one.

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