When people talk about retirement, they often treat it as a single phase in life. However, for a 65-year-old retiree who lives to be 95, this is a 30-year chapter. The first years of retirement spending are often marked with bucket-list trips and new hobbies, which gradually fade to a comfortable, slower-paced lifestyle, and finally, for many, residency in a long-term care home. These stages have been popularized as the Go-Go, Slow-Go and No-Go stages of retirement.
Working with clients to build a retirement savings goal, we find that most 50-year-olds have a good idea of what they’ll spend in those first years of retirement. However, spending habits tend to become increasingly difficult to predict into the later stages. Without a clear picture of how day-to-day spending will evolve, many retirees start to worry about having enough funds to cover both their lifestyle expenses and long-term care.
To help solve this uncertainty, we searched for concrete data on core spending patterns and discovered a staggering shortage of Canadian data on retirement spending habits. What articles we did find though, all referenced the same source: Statistics Canada’s annual Household Spending survey. So rather than relying on third-party summaries, we decided to conduct our own analysis of the data, specifically from their 2023 Household Spending by Age of Reference Person dataset.
The Process:
To start, we downloaded the full dataset and formatted it into a clear, organized spreadsheet of nearly two hundred expense categories. Many of these expenses, such as mortgage payments, rent and vehicle purchases are separate line items in our financial planning software. Instead of removing any valuable data from the spreadsheet, we made it dynamic, with the ability to toggle expenses on and off for analysis. This also allows us to account for personal lifestyle factors, such as travel habits, number of children, or smoking status.
Overall, this gave us a great starting point to see how average spending differed across age ranges. However, the Statistics Canada dataset grouped everyone 65 years and older into a single category, and as we mentioned earlier, retirement encompasses many different stages, all with their own unique expenses. Our solution was to use the same toggles as before, but this time to exclude expenses that naturally drop off when entering a long-term care facility. For example, routine food and household costs become included in the monthly fees of a care home. Then finally, after all these adjustments were made, the evolution of daily lifestyle spending became clearer.
Figure 1 - Screenshot of Expense Toggles
Our Findings:
From our analysis of Statistics Canada's 2023 Household Spending data, we noted the following changes in spending from pre-retirement to long-term care:
- Pre-Retirement: average household spending peaked at $83,462 per year between ages 40 and 54.
- Active Retirement: average annual spending dropped slightly to $70,206 (a 15.9% decrease) for the 55 to 64 age group, then declined further to $51,241 (a 27.0% decrease) at the age of 65 and older.
- Long-Term Care: looking at the remaining personal lifestyle expenses, net of long-term care fees, we see a drop from $51,241 to average spending of $30,621 (a substantial 40.2% decrease).
Figure 2 - Expense Analysis
Final Notes:
Looking at the numbers, it’s clear that spending shifts quite a lot through the different phases of retirement. Even though this is roughly what we predicted before starting our research, having real Canadian data allows us to put these insights to use.
As we mentioned earlier, clients often have a solid plan for their money in the early retirement stage, whether it’s a bucket-list trip, new hobbies, or simply doing more of what they love. The real challenge comes with the later years of retirement, where health changes, long-term care needs and the fear of running out of funds create far more uncertainty.
By mapping out how spending tends to evolve over the many phases of retirement, we take some of the guesswork out of the equation. This allows us to help pre-retirees and retirees feel confident in their savings, with a clearer understanding of how they may maintain their desired lifestyle while planning for future care needs, and ultimately turning retirement worries into financial empowerment.
Author: Rachel Majpruz
