How Much Should You Spend on a House in Retirement? Expert Guide for 2025

Are you approaching retirement and wondering how much of your nest egg should go toward housing? You’re not alone. Housing costs can make or break your retirement plans, and finding that sweet spot between comfort and financial security is crucial for your golden years.

As someone who’s helped many retirees navigate this decision, I’ve seen both successes and struggles. Let’s dive into what financial experts recommend and how to make the smartest housing decisions for your retirement.

The 30% Rule: Your Housing Budget Guideline

Financial experts consistently recommend that your total housing expenses should not exceed 30% of your overall retirement income. This isn’t just a random number – it’s a time-tested guideline that helps ensure you have enough money left for other essential expenses.

What does this 30% include? Everything related to your housing:

• Mortgage payments (if you still have them)
• Property taxes
• Homeowners insurance
• Maintenance and repairs
• HOA fees (if applicable)
• Utilities

For example, if your retirement income is $5,000 per month, your housing costs shouldn’t exceed $1,500 monthly. This leaves you with $3,500 for healthcare, food, transportation, leisure activities, and savings for unexpected expenses

Why Most Retirees Overspend on Housing

Here’s a surprising fact from finance experts: If you want a secure retirement, you should save about 12 to 15 percent of your income throughout your working years. But many people can’t achieve this because their mortgage consumes about 12 to 15 percent more of their monthly income than it should.

This creates a dangerous math problem for retirees. Every dollar overspent on housing is a dollar that can’t work for you elsewhere. And in retirement when income sources are more fixed this imbalance becomes even more problematic.

Practical Examples: What Housing Costs Look Like in Retirement

Let’s break this down with some real numbers

Example 1: If you’re living on a $30,000 annual retirement income, your housing expenses shouldn’t cost more than $9,000 per year, or $750 per month.

Example 2: For a couple with $60,000 annual retirement income, housing costs should stay under $18,000 yearly, or $1,500 monthly.

These numbers might seem tight, especially if you’re in a high-cost area. But remember – exceeding these limits could mean sacrificing other important aspects of your retirement lifestyle.

Factors That Should Influence Your Housing Budget

When deciding how much house you can afford in retirement, consider these critical factors:

1. Your Retirement Income Sources

Take stock of all income streams:

• Social Security benefits
• Pension payments
• 401(k) or IRA withdrawals
• Annuity income
• Part-time work income
• Rental property income
• Other investments

The more stable and guaranteed these income sources are, the more confident you can be in your housing budget.

2. Existing Debt Obligations

Outstanding debts will reduce your available income for housing:

• Credit card balances
• Car loans
• Medical debt
• Personal loans
• Ongoing financial support for family members

Ideally, you should aim to enter retirement with minimal debt or a clear plan to eliminate it quickly.

3. Lifestyle Preferences and Goals

Your retirement vision matters tremendously:

• Do you plan to travel extensively? (This might mean less spent on housing)
• Do you have expensive hobbies?
• How important is entertainment and dining out?
• Will you need to support adult children or grandchildren?

4. Healthcare Considerations

Healthcare costs tend to increase as we age:

• Medicare premiums and supplemental insurance
• Out-of-pocket medical expenses
• Potential long-term care needs
• Prescription medications

The average retiree spends a significant portion of their budget on healthcare, so leave room for these expenses to grow.

5. Location Factors

Where you live dramatically impacts housing costs:

• Property tax rates vary widely by region
• Maintenance costs differ by climate
• Utility expenses fluctuate by region
• Some states offer better tax advantages for retirees

Housing Options to Consider in Retirement

Staying in Your Current Home

Pros:

• Familiar surroundings and established community
• No moving costs
• Potential emotional benefits
• May be mortgage-free

Cons:

• Could be more house than you need
• Maintenance may become difficult
• May not be age-friendly
• Potentially high property taxes

Downsizing

Pros:

• Reduced maintenance
• Lower utility costs
• Potential to free up equity
• Possibly more age-appropriate layout

Cons:

• Moving costs and hassle
• Emotional adjustment
• Less space for family visits
• Market timing challenges

Renting

Pros:

• No maintenance responsibilities
• Flexibility to move
• No property taxes or insurance
• Predictable monthly costs

Cons:

• No equity building
• Rent can increase
• Limited ability to modify the space
• Potential instability

Independent Living Communities

Pros:

• Maintenance-free lifestyle
• Built-in social opportunities
• Amenities included
• Often offers continuum of care options

Cons:

• Can be expensive
• Monthly fees may increase
• May require significant upfront payment
• Less privacy than independent housing

The 4% Rule and How It Applies to Housing

You’ve probably heard of the 4% rule for retirement withdrawals – taking out 4% of your retirement savings annually to make your money last. This rule can also help you think about housing costs.

For example, if you have $500,000 in retirement savings, the 4% rule suggests you can withdraw about $20,000 annually for about 30 years. If housing should be no more than 30% of your income, that means spending no more than $6,000 per year on housing from your savings (plus whatever portion of Social Security or pension income you allocate).

Real Retirement Housing Numbers: What Retirees Actually Spend

According to the Bureau of Labor Statistics, the average household headed by someone 65 or older spends about $48,791 per year, or roughly $4,066 monthly. Of this, housing typically represents the largest expense category.

The average retired couple lives on about $624 a month for transportation expenses, which is less than the $895 that the average U.S. household spends. This illustrates how retirement spending differs from working-age spending.

Smart Strategies to Reduce Housing Costs in Retirement

1. Pay Off Your Mortgage Before Retiring

Eliminating your mortgage payment can dramatically reduce your monthly housing expenses. Consider making extra payments in your final working years to achieve this goal.

2. Rightsize Your Home

This doesn’t necessarily mean downsizing to something tiny. It means finding the right balance of space, maintenance, and cost for your retirement lifestyle.

3. Consider Geographic Arbitrage

Moving from a high-cost area to a lower-cost region can significantly stretch your retirement dollars. Many retirees find they can upgrade their lifestyle by relocating to areas with lower housing costs.

4. Explore Property Tax Relief Programs

Many states and localities offer property tax breaks for seniors. Research what’s available in your area or in places you’re considering for retirement.

5. Make Age-Friendly Modifications Early

Investing in accessibility improvements while you still have employment income can prevent costly emergency renovations later.

6. Consider House Sharing or Having a Roommate

This arrangement can cut housing costs substantially while providing companionship and security.

When It Makes Sense to Spend More on Housing in Retirement

Despite the 30% guideline, there are situations when allocating more toward housing might be justified:

1. If your home serves multiple financial purposes (like a future inheritance for children)
2. When your home provides income (through renting out a portion)
3. If you’ve eliminated most other expenses
4. When your home is central to your quality of life and happiness
5. If you have substantial assets beyond your retirement accounts

Warning Signs You’re Overcommitted on Housing

Watch for these red flags that suggest your housing costs may be too high:

• You’re regularly dipping into savings for ordinary expenses
• You’re delaying needed home maintenance due to cost
• You feel anxious about housing costs frequently
• You’re sacrificing healthcare needs to pay for housing
• You’ve eliminated most discretionary spending
• You’re accumulating credit card debt for everyday expenses

Can You Retire with a Mortgage?

While conventional wisdom suggests paying off your mortgage before retirement, this isn’t always necessary or possible. The key question isn’t whether you have a mortgage, but whether your total housing costs fit within the 30% guideline.

Some retirees maintain mortgages because:

• Their interest rate is very low
• They prefer liquidity over having money tied up in home equity
• They benefit from mortgage interest tax deductions
• They’re investing the difference at a higher return rate

Looking at the Big Picture: Housing as Part of Your Retirement Plan

Your housing decision shouldn’t be made in isolation. It’s one piece of your overall retirement strategy. Work with a financial advisor to model different housing scenarios and their impact on your retirement security.

Remember that housing needs can change throughout retirement. What works at 65 may not be ideal at 85. Build flexibility into your planning, and periodically reassess whether your housing situation still meets your needs.

The Bottom Line: Finding Your Housing Sweet Spot

Finding the right balance for housing costs in retirement is deeply personal. While the 30% guideline provides a solid starting point, your specific circumstances might justify adjustments up or down.

The most important thing is making an intentional, informed decision rather than defaulting into housing costs that might undermine your financial security. By carefully considering your income, expenses, lifestyle goals, and housing options, you can create a retirement housing plan that supports both your financial needs and quality of life.

The 7% rule can refer to either an aggressive withdrawal rate for spending a retirement portfolio or a saving goal to increase your retirement assets. As a spending guideline, a 7% withdrawal rate suggests taking 7% of a portfolio annually but carries a higher risk of depleting funds compared to the more common 4% rule, notes Forbes.

Approximately 9-10% of American households had $500,000 or more in retirement savings in recent surveys and data from 2022-2025.