Key Takeaways:
A certified financial planner warns that AI-generated retirement budgets can understate healthcare, utilities and taxes — three categories that often surprise new retirees.
The average U.S. retiree spends about $59,600 a year, roughly $4,967 a month, per Federal Reserve data — but a certified financial planner warns that AI-generated retirement budgets may understate healthcare, utilities and taxes.
"The two that stand out would be utilities at 5% to 10% and healthcare at 15% to 20%," said Chad Gammon, CFP, RICP, Enrolled Agent and owner of Custom Fit Financial. "Both of these expenses can surprise a new retiree."
ChatGPT's simple retirement framework allocates housing at 25% to 35% of spending, food at 10% to 15%, transportation at 10% to 15%, personal and lifestyle at 10% to 20%, and a combined miscellaneous and emergency bucket at 5% to 10%. Gammon said healthcare costs tend to grow faster than general inflation, and retirees should plan for long-term care needs they may need to self-fund.
The gaps carry real consequences for retirees living on fixed income. Gammon recommends keeping emergency savings separate from miscellaneous spending, targeting three to six months of expenses for those with strong Social Security income and six to twelve months otherwise. He also flagged that the budget omits taxes entirely, a category many retirees wrongly assume they will not owe.
The percentages ChatGPT assigned to utilities and healthcare are the most likely to understate real costs, Gammon said. Utility bills for electricity, gas, water, internet and phone can climb with age as retirees spend more time at home, while Medicare premiums, supplemental insurance and out-of-pocket medical costs typically rise faster than the general inflation rate tracked by the Consumer Price Index.
Healthcare is a particular concern because it compounds over a long retirement. A retiree who budgets 15% to 20% of spending for medical costs today may find that share climbing each year, especially if long-term care becomes necessary. Gammon said retirees should decide early whether they can self-fund such care or need a dedicated plan to cover it.
The framework also lumps miscellaneous costs together with emergency costs, which Gammon said should be separate. "Maybe throw miscellaneous in with personal and lifestyle," he said. A retiree with strong fixed income such as Social Security can target three to six months of expenses in an emergency fund, while those without that cushion should aim for six to twelve months.
Gammon said he was surprised the budget had no category for taxes. "I've seen retirees believe that they won't be taxed on Social Security or some retirement accounts and it is something that you will want to plan in your budget," he said.
That assumption can be costly. Depending on combined income, up to 85% of Social Security benefits can be subject to federal income tax, and withdrawals from traditional retirement accounts such as 401(k)s and IRAs are generally taxable as ordinary income. State tax treatment varies by jurisdiction, so retirees should verify the rules that apply to their own situation against the latest official guidance.
The broader lesson, Gammon said, is that a generic budget template — whether generated by AI or pulled from a book — is a starting point, not a plan. Retirees should stress-test their spending assumptions against their actual income sources, inflation expectations and health needs, and revisit the numbers at least annually as costs and circumstances change.
This article is for informational purposes only and does not constitute investment advice.
