The average American thinks $1.26 million will buy them a comfortable retirement. Their calculator has some bad news.
According to the Bureau of Labor Statistics, the average household headed by someone 65 or older spent just over $61,400 in 2024. Run that through the widely used 4% withdrawal rule — where you pull 4% of your savings each year, adjusted for inflation, to make it last 30 years — and you’d need about $1.5 million to keep that lifestyle going. That’s nearly a quarter-million more than what most people think they need.
And that’s just the average. Your number could be higher.
Where Every Dollar Goes
Housing eats the biggest piece of the pie. Once you add in utilities, it swallows roughly a third of the typical retiree’s budget. Transportation takes about 15%. Health care and food each grab around 13%. That leaves precious little for everything else — the travel, the grandkid visits, the things you actually retired for.
Here’s what catches people off guard: these aren’t luxury budgets. This is the cost of keeping the lights on, the car running, and the prescriptions filled. Sixty thousand dollars a year sounds like a lot until you see where it all goes.
The Spending Curve Nobody Warns You About
Financial planner Michael Stein broke retirement into three phases — the “go-go” years, the “slow-go” years, and the “no-go” years. In your 60s, you’re traveling, eating out, staying active. By your mid-70s and into your 80s, the pace slows down. Research by David Blanchett shows that inflation-adjusted spending drops by about 26% between ages 65 and 84.
Sounds like good news, right? Spend less as you age, and the money stretches further. Except there’s a trap hiding in that trend.
Seven out of ten people turning 65 will need some form of long-term care. Two out of ten will need it for more than five years. A private nursing home room now runs $10,646 a month — up 9% from the year before. Assisted living averages $5,900 a month, a 10% jump from 2023. Those numbers don’t show up in the average spending data. They hit like a freight train when they arrive.
The Strange Math of Retiree Caution
This is where the numbers get genuinely surprising. A 2025 study by Blanchett and Michael Finke found that married retirees withdraw just 2.1% of their savings each year — roughly half of what the 4% rule says is safe. Single retirees pull out even less, just 1.9%.
Nearly half of retirees — 46% — say they spend less than they could because they’re afraid of running out of money. And yet 78% say they’re confident they’ll have enough.
Read that again. Almost half are holding back out of fear, while nearly eight in ten say they feel fine. That gap between confidence and behavior tells you something important: the fear of going broke in old age runs deeper than any spreadsheet can reach.
The real cost of that fear? People skip the trip. They don’t visit the grandkids. They put off the things they spent 40 years working toward — while sitting on savings they may never touch.
What Separates the Spenders from the Savers
The retirees who give themselves permission to actually enjoy their money tend to have one thing in common: guaranteed income. A pension check, a solid Social Security benefit — something that shows up every month no matter what the market does. That floor of certainty makes it easier to spend from the rest.
If your retirement runs mostly on savings, you’re more likely to white-knuckle every withdrawal. That’s not irrational — it’s human. But it’s worth asking whether there are ways to build your own income floor, whether through annuities, delayed Social Security, or other strategies that take some of the guesswork off the table.
One in four Americans say they have a year or less of annual income saved for retirement. For them, the conversation is different — and more urgent.
For everyone else, the question isn’t just “do I have enough?” It’s “am I actually letting myself use what I’ve built?” Because the saddest retirement story isn’t the one where the money ran out. It’s the one where it didn’t — and neither did the living.