Retirement Retired Life

Think Retirement Means Lower Expenses? These Retirees Learned Otherwise

When it comes to retirement, the gap between expectation and reality could reshape how you plan.

By Kristin Hitchcock

Edited by Andrea Basse

Updated Dec. 7, 2025

Most people picture retirement as a simpler, cheaper phase of life: no commute, fewer work clothes, maybe less eating out. But the numbers tell a different story. According to Nationwide's Retirement Readiness Survey, non-retirees expect their expenses to drop, while many current retirees report spending as much as they did while working (or even more). It's a wake-up call for anyone assuming their budget will magically shrink once the paychecks stop.

And it raises a bigger question: how do you set yourself up for retirement when the reality doesn't match expectations?

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The expectation gap is real

Nationwide's survey highlights a clear disconnect. Workers often estimate they'll need far less money in retirement, believing daily life slows down and expenses fall. But many retirees say they were surprised by how quickly costs added up.

Some felt they underestimated ongoing essentials like housing, insurance, and everyday living expenses. That mismatch can create financial stress if someone builds a retirement plan based on overly optimistic assumptions instead of real data.

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Health care costs don't retire when you do

One of the biggest surprises retirees report is medical spending. Even with Medicare, premiums, copays, prescriptions, and uncovered services can stack up. Some retirees face unexpected dental or vision expenses or need long-term care sooner than expected.

For people still working, it's easy to overlook how employer coverage shields them from higher out-of-pocket costs. When that safety net disappears, medical spending becomes a much larger piece of the household budget.

Lifestyle spending often goes up (not down)

Retirement often brings more free time, which typically means more spending on travel, entertainment, and family trips. Of course, these extras are often a positive addition to daily life, but they can quickly inflate monthly costs.

Many retirees say they didn't realize how much "fun spending" would influence their budget, especially early in retirement when energy and mobility are higher. What felt like minor splurges sometimes turned into consistent, recurring expenses they hadn't planned for.

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Housing and utilities can stick around longer than expected

Some people assume they'll downsize or pay off their mortgage before retiring, but that doesn't happen for everyone. Rising utility bills, property taxes, maintenance, and home repairs can take a bigger bite out of income than expected. Even renters face potential increases when leases renew.

Housing can remain a significant cost even without the pressure of raising kids or commuting.

Inflation changes the math

Even modest inflation can reshape retirement spending. When prices rise faster than expected, retirees feel it directly because their income may not grow at the same pace. Everyday items, like groceries, fuel, and household goods, can eat into savings more quickly than someone anticipated in their 40s or 50s.

Retirees in recent years have seen firsthand how quickly a budget can tighten when prices jump, and that reality is prompting many to rethink how much they'll actually need.

Social Security isn't a full solution

Many working Americans imagine Social Security covering most of their retirement costs. But most retirees find that it replaces only a portion of their previous income. Retirees interviewed in the survey noted that relying heavily on one predictable source didn't leave much room for flexibility.

Rising costs, health care needs, and lifestyle choices required additional savings or income. For most people, Social Security is a supplement, not a full plan.

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What you can do

Here are a few tips to ensure you have enough to get you through your golden years.

Build a more accurate budget

Instead of assuming spending will shrink, start with your current expenses and adjust realistically. Make a list of essentials you know will continue, and then add discretionary categories like travel or hobbies.

Talking to recent retirees you trust can offer real-world insight. The goal isn't perfection, but a clearer picture of what day-to-day life could cost so you aren't caught off guard once the paychecks stop.

Plan for health care separately

Medical costs deserve their own strategy. Consider researching Medicare options, potential supplemental insurance, and long-term care coverage. If your employer offers a Health Savings Account and you're eligible, contributing while you're working could help offset future expenses.

Health care can be a huge expense in retirement, so don't forget to plan for it sooner rather than later. It's one category where preparation can reduce financial pressure later on.

Stay flexible

A rigid plan can create stress if expenses change. Building an emergency fund, maintaining some liquidity, or planning part-time income can give you more breathing room.

Having options can help you adjust and stay confident even if costs rise or aren't exactly what you'd expect. Flexibility doesn't replace savings, but it can make unexpected changes less disruptive.

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Bottom line

Many retirees discover that their expenses don't drop the way they expected, especially once health care, housing, lifestyle spending, and inflation are factored in. The takeaway is simple: don't assume retirement will automatically be cheaper than your working years. A realistic budget and flexible strategy can help prevent financial surprises.

One striking study from the Employee Benefit Research Institute found that spending often increases during the first few years of retirement as people travel more and tackle long-postponed purchases, something many workers never plan for. It's a reminder that thoughtful planning for retirement can make those early years more enjoyable and less stressful.

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