Retirement doesn’t just mark the end of a career, it also brings a shift in your financial landscape. While some expenses may stay the same, many others either shrink or disappear entirely. The lifestyle change often comes with a welcome drop in certain costs, offering more breathing room in your budget.
Here are some common expenses that retirees often leave behind.
Mortgage Payments
By retirement age, many homeowners have paid off their mortgages. If you took out a 30-year loan in your mid-30s, it would likely be paid off by age 65. If you opted for a 15-year mortgage or made extra payments, you may have cleared this debt even sooner.
A 2019 report from Harvard’s Joint Center for Housing Studies revealed that 46% of homeowners aged 65 to 79 still carry mortgage debt, nearly doubling from 24% three decades ago. Eliminating this monthly expense can free up a lot of money. This allows retirees to focus on travel, hobbies, or healthcare costs.
Tax Burdens That Decrease
One of the financial upsides of retirement is a generally lower tax burden. Since retirees typically live on fixed incomes, they often fall into a lower tax bracket compared to their peak earning years.
You also stop paying payroll taxes once you no longer earn a salary. This means Social Security and Medicare taxes (7.65% if you’re employed or 15.3% if self-employed) no longer apply.
Social Security benefits are sometimes taxed, but not always. Even when they are, no more than 85% of those benefits are subject to federal tax. Investment income like qualified dividends and long-term capital gains also tends to receive favorable tax treatment. Altogether, this can add up to meaningful savings in your retirement years.
Commuting Costs
As of 2023, the U.S. Department of Transportation reports that transportation is one of the largest annual consumer expenses, averaging $12,295 per year.
Retirement means no more daily trips to work. Whether you used to drive, take the train or carpool, these costs disappear. Instead, you can choose when and where you travel without worrying about peak-hour traffic or expensive fuel prices.
Work Attire & Dry Cleaning
Office attire can be expensive, and keeping it clean adds to the cost. In 2022, the average consumer unit spent around $43 per year on coin-operated laundry and dry cleaning, reflecting a rise of about $6 since 2020.
Once you retire, you can swap business suits for comfortable, casual clothing that’s easier to maintain. No more dry-cleaning bills, expensive work shoes, or constant wardrobe updates.
Student Loan Payments
Many retirees have paid off their student loans by the time they leave the workforce. If you’ve been steadily repaying your loans for years, retirement often marks the end of that financial responsibility. Some retirees may also qualify for federal loan forgiveness programs.
However, student loan debt isn’t entirely uncommon among older adults. As of 2023, more than 3.5 million Americans aged 60 and older still carry over $125 billion in student loan debt. If you’re one of them, paying off or managing this debt before or early into retirement can significantly ease your monthly expenses.
Life Insurance Premiums
Life insurance is often necessary when you’re working, especially if you have dependents. However, in retirement, you may no longer need a policy.
Many retirees drop life insurance if their children are financially independent and their major debts are paid off. Term policies also expire, and whole-life policies may no longer be worth the cost.
College Expenses for Kids
Raising children is expensive, and education can be one of the biggest ongoing costs. Parents often spend decades funding school fees, extracurriculars, and college tuition.
By retirement, your children are likely financially independent and done with school. The average annual tuition at a four-year institution is $17,709, making college a major financial load for working parents. Retirees who no longer shoulder this burden gain welcome financial relief, freeing up funds for healthcare, travel, or simply peace of mind.
Professional Memberships & Subscriptions
Many professionals have to pay for memberships in organizations, trade associations, or unions while working. These can range from hundreds to thousands of dollars annually.
Additionally, work-related subscriptions such as industry magazines or software licenses may no longer be necessary.
Debt Payments
One of the best financial moves before retirement is eliminating debt. Many retirees aim to clear credit card balances, car loans, and other high-interest debt before leaving the workforce.
According to Experian, the average credit card balance for retirees is around $6,043, and paying off that debt before retirement can free up hundreds of dollars monthly.
Employment-Related Meals and Entertainment
During your working years, you may have regularly spent money on meals, coffee runs, and after-hours socializing tied to your job. Business lunches, team outings, or even daily takeout near the office can quietly add up over time.
In retirement, those work-related spending habits usually disappear. With more time and flexibility, retirees often cook at home, dine out less frequently, and avoid spontaneous workplace expenses. This shift can lead to noticeable savings in your monthly budget.
