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GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines<\/a> and our products and services review methodology<\/a>.<\/p>\n 20 Years Trusted by The years leading up to retirement<\/a> can be tense. The prospect of no more paychecks and living off savings makes many soon-to-be retirees wonder what they can safely spend in that first year.<\/p>\n According to Nick Hamilton, national manager of Alliant Retirement and Investment Services<\/a>, that anxiety is normal.\u00a0<\/p>\n \u201cIt\u2019s this massive year of transition,\u201d he said. \u201cYou stop getting W-2 income, you stop funding accounts, and for the first time, you\u2019re taking money out. Most people really just want to know: Am I going to be okay?\u201d<\/p>\n<\/p>\n The truth is, that first year in retirement is often the most expensive. While the 2024 Consumer Expenditure Survey<\/a> (CES) estimates retirees age 65 and over spend an average of about $60,000 each year, Hamilton notes that number can be far higher in the first year, with many retirees splurging on bucket-list items or paying more upfront to be comfortably set up for old age.<\/p>\n \u201cIn that first year, retirees might spend 10% of their liquid assets, versus the 4% that is typical throughout the remainder of their retirement,\u201d Hamilton said.<\/p>\n Here are some of the biggest expenses \u2014 and savings \u2014 retirees can expect in year one<\/a>. <\/p>\n Biggest Savings Biggest Expenditures The first year of retirement is rarely the cheapest \u2014 often, it\u2019s the most expensive. Planning for an upfront spending spike \u2014 and then intentionally scaling back \u2014 is what keeps Hamilton\u2019s clients from running into trouble. As he puts it: \u201cWe can usually recover from that first-year bump. The challenge is helping retirees dial back to their long-term plan once they\u2019ve had a taste of spending more.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Commitment to Our Readers GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use…\n","protected":false},"author":2,"featured_media":217889,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,17299,147,530,14811,1666],"class_list":["post-217888","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-gobankingrates","tag-personal-finance","tag-personalfinance","tag-planning","tag-retirement"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/217888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=217888"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/217888\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/217889"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=217888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=217888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=217888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/cdn.gobankingrates.com\/wp-content\/uploads\/2023\/11\/icon-20.svg?webp=1&quality=75\"){kind=icon}
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\nWork expenses: Hamilton said he sees costs like commuting, tolls, parking, lunches out, and wardrobe \u201cshrink to almost nothing\u201d in the first year of retirement. The CES backs this up: Pre-retirees (ages 55 to 64) spend nearly $14,500 per year on transportation \u2014 close to double the $9,000 spent by those 65 and older.
\nRetirement contributions and payroll deductions: While retirees no longer bring in a paycheck, they also no longer make 401(k) contributions<\/a>. \u201cThat\u2019s 7[% to] 10% of their pre-retirement income that goes back in their pocket,\u201d said Hamilton. The CES data reflects this shift, with 55 to 64 households spending more than $11,000 annually on personal insurance and pensions (including retirement contributions) compared to just $3,300 for retirees 65 and up.<\/p>\n
\nDebt: Hamilton advises his clients to pay off debt<\/a> before leaving the workforce. \u201cWe don\u2019t want anyone retiring with debt,\u201d he said. Still, many enter retirement carrying balances. According to Experian\u2019s 2025 Consumer Debt Study<\/a>, baby boomers hold an average of $18,474 in debt \u2014 an expense many aim to clear in that first year.
\nRelocation costs: Another major expense comes from downsizing or relocating<\/a>. \u201cFor many retirees, their kids are fully grown, so they no longer need a five-bedroom house and all the upkeep that takes,\u201d Hamilton said. While a smaller home or a move closer to family may reduce long-term costs, upfront outlays \u2014 repairs, closing costs, moving expenses, and new furnishings \u2014 can make year one more expensive than expected.
\nVacations and bucket-list items: Hamilton often sees retirees celebrate milestones with a \u201cblowout\u201d trip.\u00a0\u201cThere\u2019s almost always a big anniversary vacation or a bucket-list journey<\/a>,\u201d he said. While these are meaningful, they can quickly add tens of thousands to year-one spending if not planned for.
\nHealthcare: Medical costs typically rise with age. In 2023, households 65 and older spent more than $8,000 annually on healthcare compared to $7,100 for those under 65. Many retirees also get hit with Medicare\u2019s Income-Related Monthly Adjustment Amount (IRMAA), which can increase premiums for Part B and Part D if income is above certain thresholds\u2013a surprise Hamilton says \u201cless than 10% of people walking in the door know about.\u201d<\/p>\n