Retirement brings new financial challenges, particularly when Social Security makes up all or most of your income. To ensure a good quality of life later on, it’s vital to cut spending now.
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But where’s the best place to start? Housing. By eliminating or reducing mortgage payments and other homeowning costs retirees can fund a better lifestyle as they age.
Housing costs represent the biggest expense for retirees. They amount to roughly 36% of spending for Americans 65 years and older. The situation has grown more challenging in recent years. In 2023, over a third (34%) of older households were cost burdened, paying more than 30% of their income on housing. For the more than 10.5 million older homeowners who still have mortgages, that percentage is usually far higher.
The average retiree household spends $21,445 annually on housing — approximately $1,787 monthly. This includes mortgage payments, property taxes, insurance, maintenance, and repairs. The financial burden is particularly steep for those still paying off their homes: 43% of older owners with mortgages are cost burdened, compared to just 19% of those who own their homes free and clear. This is why it makes sense for retirees and soon-to-be retirees to downsize their homes, or even consider relocating to less-expensive regions.
By minimizing or eliminating mortgage payments, those on a fixed income can save for expenses that are likely to increase as they age: namely, healthcare costs. Fidelity’s 2025 estimate reveals that a 65-year-old retiring this year can expect to spend an average of $172,500 on health care and medical expenses throughout retirement — and that assumes enrollment in Medicare Parts A, B, and D, but doesn’t even include long-term care expenses.
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Not only does owning a cheaper house reduce mortgage payments, but it also means spending less on maintenance. Home repairs are retirees’ single most common unexpected expense, according to the Society of Actuaries, though this financial surprise can be mitigated by having less house to upkeep.
Downsizing to a cheaper home can also translate into more retirement savings. According to research by Vanguard, those aged between 60 and 69 have the highest potential to unlock home equity through relocation, which can be used to inject more money in a retirement nest egg — a useful source of cash for those on a limited income.
