The age 67 brings a critical milestone for anyone born in 1960 or later as it marks the point when they can collect their full Social Security retirement benefits. Waiting until this age ensures retirees receive every dollar they qualify for, without reductions for early filing. Although benefits can start as early as 62, that choice locks in smaller monthly payments for life.
Some people wait even longer. Postponing benefits until age 70 allows for delayed retirement credits, which raise monthly income permanently. Still, most middle-class Americans don’t wait. According to the Center for Retirement Research at Boston College, the average person claims benefits around age 65, a figure that’s gradually increased over the years.
If someone is taking Social Security benefits early, it might hint at tight budgets. If personal savings do not add up to a considerable amount, the Social Security benefits come handy and that explains the early claims of the same.
Data from the Federal Reserve shows that the median retirement balance for households led by someone aged 65 to 74 is about $200,000. While that amount does not sound less, when it is stretched over 15 to 30 years, it does not seem sufficient for all necessary spending.
However, while there is always a possibility of a retired person finding it difficult to balance their expenditure and their savings, one good thing is that spending generally comes down with age.
This pattern is also proven by the Consumer Expenditure Surveys from the U.S. Bureau of Labor Statistics. Americans aged 55 to 64 spend about $83,379 per year, while those aged 65 to 74 average around $65,149.
That’s roughly a 22% drop. When you spread that decrease gradually through the decade, spending falls by about 2.4% annually. Using that estimate, a 67-year-old’s average yearly spending would be around $70,139, or about $5,845 per month.
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It should be noted here that the maximum amount that a retired person has to spend is on housing. Interestingly enough, people aged 65 to 74 spend roughly $1,851 a month on housing. The money is spent for various purposes, including maintenance, taxes, or utilities.
The costs are bound to change based on one’s location and the type of house they inhabit but still, significant money is required to maintain a place of residence.
Another key space where retired people spend money is transportation. The average cost spent behind transport is about $908 per month. This includes car insurance, fuel, maintenance, and the cost of replacing vehicles every few years. Since retired people also need to move, this comes across as an unavoidable cost.
Healthcare also quickly adds up. Those between 65 and 74 spend an average of $661 monthly on medical costs, slightly increasing with age. Even routine care and prescriptions can strain a fixed income, and although older retirees spend only a small amount more, these costs rarely decline.
Altogether, necessities alone can erode much of a retiree’s budget. The average spending of a retired person comes somewhere near $5,800 a month, which often seems difficult to manage even after years of savings.
Therefore, it is important for retired people to ensure that they are not only dependent on Social Security money but also have other avenues from which they can have some income. Savings can fall short and therefore it is important to invest money in proper places while one is working.
