![]() ![]() Without such data they are unable to test the validity of their economic models describing consumer behavior. Access to such data assists them in developing retirement plans for their clients that have a better factual basis than anecdotal spending rules based on limited personal experience. For them, having access to typical retirement spending data can be extremely helpful in thinking through their own future spending. ![]() Individuals planning for their future are often perplexed about how their spending might change as they enter into and progress through retirement. For such retirees spending at retirement exhibits a much stronger drop than for the average retiree.Īccess to actual spending data for retirees can be valuable to several categories of people: The overwhelming number of involuntary retirements can be traced back to major health difficulties or extended unemployment. However not all retirees exhibit a spending drop: about 53% of households exhibit a drop in spending at retirement, another 35% report a negligible change in spending at retirement, while 12% reported an increase in spending at retirement.Ī significant percentage of individuals (25-28%) enter retirement involuntarily. The size of the typical spending drop upon retirement is inversely related to household wealth (poorer hourseholds exhibiting on average a much larger spending drop). Since housing is the largest retirement expense, it is not surprising that such differences are clearly seen in this category. Studies of retirement spending patterns across racial and income level subgroups reveal measurable heterogeneity in U.S. Increases in health care spending are not sufficient to change the downward trend in total inflation-adjusted spending, at least not until late in retirement.Health Care expenses rise with age, but remain substantially lower than housing expenses.Housing + Related is by far the largest spending category for all age groups.Inflation-adjusted spending continues dropping slowly afterwards as retirees age into their late 70's.special clothing and transportation) and changes in food expenditures. Spending drops modestly (14%) immediately after retirement, partly due to the cessation of work-related expenses (e.g.Retirement spending trends observed for the average U.S. Examples of such longitudinal studies include spending pattern changes as individuals transition into retirement, and spending changes during recessionary periods as a function of retirement income level. The Health and Retirement Study actually follows the same people over time, in what is known as a panel design, allowing even more detailed examination of the effects of retirement on individuals. Since both surveys have been conducted repeatedly over long time periods, they allow changes in retirement spending patterns over time to be examined. retiree as well as for retirees from a range of lower and higher income subgroups. Both of these survey datasets allow estimates of retirement spending for the median U.S. Bureau of Labor Statistics' Consumer Expenditure Survey and from the biennial Health and Retirement Study survey conducted by the Survey Research Center at the University of Michigan. ![]() The two major sources of retirement spending data for U.S. Careful analysis of such data provides important guidance for individuals, financial planners, economists, as well as for developers of retirement planning software. Surveys of retirement spending data describing typical retiree spending patterns are an important resource for the retirement planning process. ![]()
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