From the January 2010 issue of Boomer Market Advisor • Subscribe!

Five ways spending changes for retirees

Have your clients budgeted for these retirement spending changes?

Are your clients planning to decrease their spending once they retire? They may not have a choice. U.S. News and World Report cites research from the University of Missouri that shows active retirees could spend as much as 100 percent to 110 percent of their working budget in retirement. The magazine highlights some of the ways retirees redirect their income after they stop working. Below are five things your clients need to consider as they budget their approaching retirement.

1. Less saving
Perhaps the most obvious change comes when retirees stop receiving a regular income to sock away savings. Just 3 percent of retiree spending goes to retirement saving, compared with 13 percent of employee spending, according to the magazine.

2. Lower food costs
About 9 percent of retirees' budgets goes to food eaten at home, compared with 7 percent for people still working, the magazine cites data from the Bureau of Labor Statistics' Consumer Expenditure Survey. And, when they do eat out, seniors tend to spend less than workers.

3. Higher housing costs
Seniors who are lucky enough to be able to pay off the mortgage on their homes before leaving the work force can face unexpected costs. Property taxes and home maintenance take a bigger chunk of retirees' incomes than they do of workers'.

4. Lower transportation and clothing expenses
Retirees can save money when they stop building and maintaining their professional wardrobe. People who have left the workforce spend just 3 percent of their annual budget on clothing, compared with 4 percent for workers, the magazine writes. The same thinking applies to transportation. Giving up the commute saves money - not to mention headaches - and, according to U.S. News, retirees purchased fewer cars and spent less on gasoline and motor oil than workers did in 2008.

5. Higher health care costs
The rising cost of health care for older Americans is well-documented. Retirees spend almost three times as much of their income as workers, especially on health insurance, medical services, drugs and medical supplies, the magazine writes. As retirees leave their employers plan and get their own coverage they may face higher deductibles or copays, and may lose coverage for things they've grown accustomed to, such as dental expenses or glasses.

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