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What's the average 'empty nester' budget?

Like a lot of recent retirees, Larry in Kansas is keeping a close eye on his household budget and wants to know how much other people like him are spending.  So we took a spin through the government consumer spending data to see where the money goes for others in his shoes. By John W. Schoen
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Like a lot of recent retirees, Larry in Kansas is keeping a close eye on his household budget. He's trying to figure out what the "average" empty-nester in his situation spends on various expense categories. So we took a spin through the government consumer spending data to see where the money goes for others in his shoes.

I am recently retired and wanted to know if MSNBC had any stats or budget information on the "average" dollars spent on groceries, eating out and other expense categories for two “empty nesters."
— Larry M., Overland Park, Kan.

If you’re looking for statistics on how Americans spend their money, you’ll probably find just about everything you’re looking for over at the U.S. Bureau of Labor Statistics. Like any set of economic statistics, these “average” numbers often bear little resemblance to what you or I —or any individual — actually spend.

That’s because “averages” smooth out differences like age and income in spending patterns. Regional differences can also have a big impact: You’ll pay 8.5 cents a kilowatt-hour in Cleveland, for example, but it’ll cost you nearly twice that in New York City. In Boston, they spent an average of $834 a year on booze; in Miami the average is less than half that, according to the BLS.

If you dig a little deeper, you can get closer to your own household’s characteristics, and the folks at the BLS are pretty thorough about covering the bases. To find out where the money goes, the Census Bureau, on behalf of the BLS, conducts thousands of interviews with  “consumer units” covering various ages, occupations, races, incomes, regions, education and income levels, household size, etc.

Every three months, for five visits, researchers ask people in each of these “consumer units” to fill out a questionnaire on spending. Consumers also are asked to keep a separate diary, logging everything they spend, every day, for two weeks. So while the numbers are far from perfect, they’re about the best data you can get your hands on for free. (Actually, you’ve already paid for it with your taxes.)

In the end, a lot depends on how you slice the numbers. There’s no “empty nester” category as such. There are tables broken down by the number of people in the household, but the “husband and wife only” category includes couples of all ages. In your case, the closest to your circumstances would probably be the 55- to 64-year-old old slice of the data sorted by age. Still, this isn’t quite your situation: these “consumer units” had 1.3 wage earners in the house and some still had their annoying kids living with them. (But on average, they only had 0.1 child hanging around the household.)

With that in mind, let’s take a look at the “average” budget for Nick and Esther Empty-Nester:

Incomes and Taxes
As of 2005, the latest numbers available, the Empty-Nesters had pre-tax income of $64,156 —$46,563 of which came from wages and salaries; $4,533 from self-employment; $9,582 from Social Security and other retirement plans; $2,539 from interest and dividends; and the rest from things like unemployment, workers’ compensation, veterans’ benefits and other sources.

From that, they paid $3,088 in taxes, including federal, state, local and personal taxes like sales tax. That left them with $61,068 to spend.

Alas, the family balance sheet was not in great shape in 2005. Though the Empty-Nesters managed to save $10,843, their liabilities rose by $15,501 — putting them $4,658 deeper in debt.

The Empty-Nesters live in a comfortable home valued at $223,763 (which would cost them an estimated $1,025 a month if they rented) and spent $15,769 on housing in 2005. That included $3,076 on mortgage payments, $2,722 of which went to pay down the principal (about a third or 55-to-64-year-olds have the house paid off); $1,883 on property taxes and $1,692 on maintenance and repairs. Utilities burned through another $3,427, including a $1,255 electric bill, a $1,077 phone bill, a $402 water bill, and heating costs of $521 for natural gas and $172 for fuel oil.

Having the house to yourself is a great time to fix up one of the kids’ bedrooms as a home office or finally buy a new rug that won’t get ruined by messy offspring. So the Empty-Nesters spent $2,231 on new rugs, furniture, appliances and other “household equipment.” Household supplies (which for some reason includes postage stamps) came to $736. Household "operations" — which includes things like dry cleaning or computer repair — came to $689.

With those hungry adolescents finally out the door, the Empty-Nesters are paying less on their grocery bill — $3,487 for food prepared at home. (The grocery bill for their neighbors, the 35- to 44-year-old Soccer-Schleppers came to $4,121. Across the street, the 45- to 54-year-old Teen-Frenzies spent $3,807). The Empty-Nesters like to eat out a lot, though, and spent $2,715 on “food away from home.” And they drank $454 worth of booze.

With daughter Ellen Empty-Nester buying her own designer jeans, the couple’s clothing bill also fell — to $1,784. Esther Empty-Nester seems to like clothes shopping ($650) more than her husband, Nick ($397). Between the two of them, they spent $298 on shoes.

The Empty Nesters have 2.2 cars in the garage, which set them back $8,908 a year to purchase, maintain, insure and keep filled with gas. About $3,750 of that represents the annual contribution to the sticker price of a new car. Gas and oil came to $2,100 and the insurance bill was $944. And $537 went to public transportation.

Health care
Not surprisingly, this spending category rises with age. By the time you hit the 55 to 64-year-old range, the average cost of health care comes to $3,410 a year. That includes $1,585 for insurance, $1,585 on medical services and $494 on drugs. (By comparison, your healthy, under-25-year-old kids paid just $704 for health care.)

Entertainment — which includes everything from tickets to the movies to the cost of caring for a pet — set the Empty-Nesters back $2,429 in 2005. Other budget items include personal care products and services ($550); reading ($167); education ($733 — the kids must be finished with college); tobacco ($336) and “miscellaneous” $981.

Our couple's budget also included $1,595 for gifts, including food ($205) and clothing ($292).  And when all those bills were paid, they donated $1,960 to the charities of their choice.