When you’re trying to figure out how much to save for retirement, it might help to investigate your expected expenses. You may believe your spending will stay about the same, but a recent report by the Employment Benefit Research Institute suggests that older Americans’ spending habits shift around the time of retirement.

The biggest expenditure for all American households – retirees included – is housing and home-related purchases. Retirees continue to spend 40 to 45 percent of their monthly budgets on housing. What this tells us is that retirees who are able to adjust their housing costs down as far as possible will free up income to spend on other bills.

The report also found that medical expenses tend to grow in retirement. While households with at least one member aged 50-64 spend about 8 percent of their total budgets on medical bills, households with at least one member over the age of 85 spend 19 percent of their budgets on healthcare. In other words, health care expenses can more than double in retirement. Retirees who anticipate these expenses and plan for them will face fewer unpleasant surprises.

Retirees tend to spend less on transportation, which makes sense when the cost of commuting to work is no longer a concern. Spending on entertainment also falls, while clothing and food budgets remain about the same.

According to the report, average income falls significantly in retirement, particularly between the ages of 75 and 85. The average household is making 20 percent less by age 75, but a staggering 50 percent less by age 85.

While this report is hardly surprising, it serves to underscore the importance of sound retirement planning. Those preparing for retirement should remember:

• Plan ahead for unexpected medical expenses
• Minimize the cost of housing as much as possible (pay down the mortgage before retirement, downsize to a smaller home, or relocate to an area with a lower cost of living
• Avoid developing lifestyle habits that are unaffordable on a retirement budget

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