The Average Monthly Retirement Budget Is $4,345 — Can Millennials Live Off That?

It’s hard for millennials to believe that they are rapidly approaching middle age, but as this milestone strikes, so does the impending doom of retirement savings and expenses. With the average monthly retirement budget currently standing at $4,345, according to the Bureau of Labor Statistics, many are left doing the math: How much you do spend — and how much you should spend, as a millennial, when preparing for your golden years?

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This figure represents the current average expenses for retirees in the U.S. today, but how does it hold up when you consider inflation, changing lifestyle expectations and the economic challenges that millennials face? GOBankingRates has conducted several studies to best determine the cost of living estimates for different cities, states and age ranges. Here are some key takeaways:

• The Bureau of Labor Statistics found the average expenses for someone in retirement are approximately $4,345 per month.
• A study from Sunmark Credit Union found that the average millennial spends about $5,845 per month on expenses such as groceries, dining, housing, utilities, insurance, entertainment and more. This means that if this spending is kept up in retirement, you would be $1,500 over budget.
• One GOBankingRates study that evaluated the retirement affordability of each state showed that nearly half of the United States had an average cost of living estimate under $4,000 a month, which would put millennials about $1,800 over budget in many states.
• The same research showed that the most expensive state was Hawaii, with a monthly estimated cost of living of almost $8,348, whereas the state with the lowest estimated monthly cost of living was West Virginia at $2,804.

See more findings from the GOBankingRates study.

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Breaking Down a $4,345 Retirement Budget for Millennials

To understand whether millennials can live off this budget, it’s helpful to break down what this amount typically covers. With that in mind, the main components of a retiree’s monthly budget tend to include everything from housing to transportation. The following examples are based on a GOBankingRates study for what you would expect to pay on expenses living in Tampa, Florida.

• Average monthly housing costs : $1,272 for things like rent, mortgage payments, property taxes and home maintenance, which make up the largest portion of your budget both now and in retirement
• Average monthly healthcare expenses : $489 a month on such necessities as medical bills and insurance premiums
• Average monthly grocery bills : $500 on food costs such as groceries, dining out and other food-related expenses
• Average monthly transportation costs : $607 a month on expenses such as car payments, public transport, gas and maintenance costs
• Miscellaneous expenses : $88 a month will go to all the other pieces of personal entertainment in your budgetary puzzle, which include travel, hobbies, shopping and other discretionary spending.

Given these allocations, millennials may find themselves questioning whether $4,345 will be sufficient for their retirement, particularly when factoring in inflation and future cost-of-living adjustments.

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Don’t Forget Inflation, Debt and the Failed Promise of Homeownership

One of the primary concerns for millennials is inflation . Over time, the purchasing power of $4,345 is likely to decrease. If inflation continues at a moderate rate of around 2% to 3% annually, this could significantly erode the value of a fixed retirement income.

Other concerns, such as student loan debt, leave millennials in a lurch when it comes to saving for the future. Unlike previous generations, millennials are burdened with significant student debt and high interest rates, which has delayed homeownership, saving for retirement and other significant financial goals.

Millennials are also less likely to own homes compared to the often more financially solvent baby boomers. As a result, many may still be renting or paying off mortgages well into their retirement years. This could significantly increase the portion of their budget allocated to housing, especially in high-cost areas.

Will Millennials Even Get Social Security?

There’s nothing quite like the feeling of paying into a system for your future security that has been rumored to be going bankrupt since you were a kid. With the Social Security trust fund projected to run short by 2034, millennials are understandably anxious about whether they’ll receive full benefits.

While the program will likely still exist in some form, reductions in benefits or delayed retirement ages could make Social Security less reliable as a primary income source.

Final Take To GO: Can Millennials Make $4,345 Work?

The bottom line is that the answer is both yes and no, as it depends heavily on individual financial circumstances. While the average monthly retirement budget of $4,345 may seem daunting, millennials can make it work with careful planning, realistic expectations and a flexible approach to retirement.

It won’t be easy, and it requires adjusting for inflation, healthcare costs and potential changes to Social Security, but with the right strategies, millennials can retire comfortably — even on a budget. To get a jump start on making a realistic budget work for you in retirement, try living off the current retirement budget of just over $4,000 for the next couple of months.

Here are a few strategies you can use to help make it work:

1. Early and Consistent Savings : Starting retirement savings as early as possible and contributing consistently to 401(k) plans, IRAs and other investment vehicles can significantly boost financial security in retirement. Compounding interest is a powerful ally for long-term savers.
2. Diversifying Investments : Relying solely on Social Security or a pension is risky. Millennials should focus on building diverse investment portfolios, including stocks, bonds and real estate, to ensure multiple income streams in retirement.
3. Debt Management : Reducing high-interest debt before retirement, especially student loans and credit card debt, can free up more monthly income for living expenses.
4. Downsizing : Many retirees downsize their homes or move to areas with a lower cost of living . Millennials living beneath their means may find this a useful strategy to reduce housing expenses in retirement, allowing more flexibility with their budget.
5. Healthcare Planning : Investing in long-term care insurance or Health Savings Accounts (HSAs) can help you manage healthcare expenses in retirement.

This article originally appeared on GOBankingRates.com : The Average Monthly Retirement Budget Is $4,345 — Can Millennials Live Off That?