The Average Canadian Spends THIS Much in Retirement? (Shocking!)

Picture this: You’ve worked hard your entire life, and now, you’ve finally retired. But do you really know what your monthly spending will look like? It’s a common concern I hear all the time from people planning their retirement. 

In this article, I’ll break down the average spending for Canadian retirees, what they spend their money on, and how spending changes as you move through different stages of retirement. Stick around until the end, when I’ll share real insights from our clients on what they actually spend in retirement.

Average household spending in Canada by retiree per year and per month

Let’s dive right into it: The average household expenditure for Canadian retirees—those aged 65 and over—was $61,855 in 2021, which are the most recent official stats. This breaks down to about $5,154 per month. 

Breakdown of What Retirees Spend Money On

Let’s take a closer look at what retirees typically spend their money on. Check out this table of the top expenditures for retirees in Canada. The largest portion goes to shelter, which includes the cost of their main accommodation and related expenses. On average, retirees spend around $13,814 annually on shelter, which breaks down to roughly $1,151 per month, or about 22.3% of their monthly spending. 

I found this a little bit surprising. Despite many retirees owning their homes, retirees still incur significant costs related to maintenance, property taxes, and utilities. This underscores the importance of budgeting for ongoing home-related expenses even after mortgage payments have ended.

Food is another significant category. Retirees spend about $7,670 annually on food, which averages out to $639 per month, or 12.4% of their monthly spending. This includes both groceries and dining out.

Transportation is another major expenditure. While transportation costs are generally lower for retirees compared to younger people, they still represent 8.8% of their monthly budget. 

Healthcare understandably sees a higher allocation due to increased medical needs as people age, accounting for 5.6% of monthly spending. Personal insurance and pensions also take up a significant portion, at 5.4% of monthly spending, highlighting the need for continued financial security in retirement.

Household operations, which include expenses for maintaining the home, add up to 5.3% of monthly spending.

How Your Costs Decrease Throughout Life

Average Annual and Monthly Household Spending by Age in Canada

I gathered this data from Stats Canada and compiled it here to provide a clear picture of how household spending evolves with age. Let’s dive into the numbers.

Middle-Aged Households (Aged 40 to 54)

Spending increases on average to about $120,646 annually or $10,054 monthly. This rise is driven by higher family needs, such as larger homes, increased food consumption, and education costs for children. Healthcare costs also start to rise, and there’s a stronger focus on saving and investing for retirement.

Pre-Retirement Households (Aged 55 to 64)

Spending decreases slightly to about $99,623 annually, or $8,302 monthly. During this period, childcare expenses drop, but healthcare costs continue to rise significantly. There is also a focus on paying off mortgages and preparing financially for retirement.

Retired Households (Aged 65 and Over)

Spending drops further to about $61,855 annually, or $5,154 monthly. The focus shifts to such as housing maintenance, food, and healthcare. Transportation costs decrease as work-related travel declines, and there’s less spending on luxuries and more on necessities.

How Costs Decrease in Retirement

Now, your “average” retirement costs only represent part of the picture of retirement spending. In general, there are three phases of spending in retirement: high spending, medium spending, and low spending. Meet Alex, a Canadian navigating the changes in his household expenses as he transitions through these stages.

Early Retirement (Ages 65 to 70)

In his early retirement years, Alex spends about $70,000 annually, or around $5,833 monthly. His housing costs are still significant but reduced now that his mortgage is paid off, although he still manages maintenance and property taxes. With no more daily commutes, his transportation costs decrease, but he still needs to maintain his vehicle and occasionally travels.

Healthcare costs start to rise due to increased medical needs and insurance premiums. He spends slightly less on food as he dines out less and prepares more meals at home. Alex also enjoys spending time on hobbies and travelling, taking advantage of his newfound free time.

Mid Retirement (Ages 70 to 75)

As Alex moves into his mid-retirement years, his annual spending decreases to around $60,000, or about $5,000 monthly. His housing costs stabilize or slightly decrease, possibly because he downsizes his living space.

Transportation costs reduce further as he travels less. Healthcare expenses continue to rise with more frequent medical care and prescriptions. His food costs remain stable or decrease further as his dietary needs change. Alex’s spending on travel has reduced slightly, and he focuses more on home-based activities.

Late Retirement (Ages 75 to 80 and beyond)

In his late retirement years, Alex’s annual spending drops to around $50,000, or about $4,167 monthly. Housing costs remain stable with ongoing maintenance and utilities. Transportation costs are significantly lower as he rarely travels. Healthcare becomes a major expense, including costs for long-term care services. Food expenses are relatively low due to simpler dietary needs. Travel spending decreases, and Alex focuses more on community and home activities.

This table highlights how Alex’s spending has changed throughout the years, which is typical of many clients that we see.

Spending Phases in Retirement

Key Conclusions

As you progress through different phases of life, from middle age to retirement, household spending patterns change significantly:

1. Middle Age (40 to 54): This period sees the highest spending due to larger family needs, education costs, and a focus on saving for retirement.
2. Pre-Retirement (55 to 64): Spending begins to decrease as childcare costs drop, and the focus shifts to healthcare and paying off mortgages.
3. Retirement (65 and Over): Spending reduces further, with priorities shifting to essential living costs and healthcare, while transportation and luxury expenses decline.

1. High Spending Phase (Early Retirement): Significant but reduced housing costs, decreased transportation expenses, rising healthcare costs, and more spending on leisure and travel.
2. Medium Spending Phase (Mid Retirement): Stabilizing or slightly decreasing housing costs, further reduced transportation expenses, continuing rise in healthcare costs, and reduced spending on travel and leisure.
3. Low Spending Phase (Late Retirement): Stable housing costs, minimal transportation expenses, significant healthcare costs, and lower food and leisure spending.

Understanding these phases helps retirees like Alex plan effectively, ensuring they have the necessary resources to cover expenses and enjoy a fulfilling retirement without financial worries.

Client Experience:

At Blueprint, we’ve observed a wide range of retirement spending patterns among our clients. On average, retirees tend to spend anywhere from around $4,000 to $7,000 per month. Households will be slightly higher, usually at a minimum of $5,000 – $9,000 per month.

However, it’s important to note that this can vary significantly. We’ve seen some retirees manage comfortably on as little as $2,000 a month, while others spend upwards of $10,000 a month.

A common trend we notice is that spending tends to start at a higher range in the early years of retirement and then gradually decreases, similar to the example with Alex that we went through earlier. Typically, there’s about a 25% reduction in spending as retirees settle into their new lifestyle. For instance, if you’re spending $100,000 annually in your initial retirement years, you might find that this decreases to about $75,000 per year as time goes on.

This reduction can be attributed to several factors mentioned above:

1. Housing Costs: Many retirees pay off their mortgages, reducing one of their largest expenses.
2. Transportation: With less need for daily commuting, transportation costs decrease.
3. Healthcare: While healthcare costs can rise, other discretionary spending tends to decrease.
4. Lifestyle Changes: As retirees age, their spending on travel, dining out, and other leisure activities often declines.

Understanding these trends can help in planning a sustainable retirement budget. By anticipating changes in spending habits, you can make sure that you have enough saved to cover their needs throughout their retirement years.

At Blueprint, we’re here to help you navigate these changes and make informed financial decisions. Check out our services to learn more about our financial plans, and book a free consultation when you’re ready!