Our featured article of the month, How Retirement Spending Changes With Time, is a primer for pre- or new retirees to help set expectations and dampen fears. While retirement will be a new and exciting adventure to embark on, with many retirees certainly “living it up” in the first few years, patterns of behavior will prevail and finding your groove is anticipated. Unlike winning the lottery, you saved and worked for a long time to get to this point. Expecting your lifestyle to dramatically change with a redesignation over a very short period of time is unlikely.
Interestingly, below the article I added in EBRI 2024 Retirement Confidence Survey results highlighting some positive statistics. Eventhough prices have risen due to inflation and lifestyle expenses are higher, more than half are still saving for the future and planning on leaving an inheritance for the next generation. Almost three quarters respond to not needing to cut current spending in order to achieve that goal. Those results are encouraging especially int he last few years of rising prices.
However, as with most things, retirement doesn’t happen without some planning. And planning does involve some time and work. But that isn’t a reason to put it off until some point in the future.
New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. Some households “live it up” and spend more than they anticipate as retirement starts to unfold. In 10 or 20 years, though, they may not spend nearly as much.
By The Numbers
The initial stage of retirement can be expensive. The Bureau of Labor Statistics figures show average spending of $70,570 per year for households headed by pre-retirees, Americans age 55-64. That figure drops to $52,141 for households headed by people age 65 and older. For people age 75 and older, that number drops even further to $45,820.1
Spending Pattern
Some suggest that retirement spending is best depicted by a U-shaped graph — It rises, then falls, then increases quickly due to medical expenses.
But a study by the investment firm BlackRock found that retiree spending declined very slightly over time. Also, medical expenses only spiked for a small percentage of retirees in the last two years of their lives.2
What’s the best course for you? Your spending pattern will depend on your personal choices as you enter retirement. A carefully designed strategy can help you be prepared and enjoy your retirement years.
Key Findings from EBRI 2024 Retirement Confidence Survey
While expenses in retirement are higher than some retirees originally anticipated, retirees’ lifestyle in retirement is better than they expected.
Significantly up this year, over a third of retirees say their travel, entertainment, or leisure expenses are higher than they expected (Figure 11). While over half of retirees say their overall expenses in retirement are higher than they originally expected, nearly four in five say they are able to spend money how they want, within reason (Figure 12).
Despite higher-than-expected costs, significantly more retirees this year — three in 10 —believe their overall lifestyle in retirement is better than expected. Additionally, over two-thirds of retirees agree they are having the retirement lifestyle they envisioned. A quarter of retirees strongly agree with this statement (Figure 12).
Not only are retirees managing their current expenses, but 58% say they are still saving for the future. In addition, they are planning for the next generation, as nearly two-thirds of retirees are confident they will have enough money to leave an inheritance. Moreover, about seven in 10 retirees disagree that they need to spend less than they could because they would like to leave a legacy inheritance (Figure 12).
1. Bureau of Labor Statistics, 2023
2. BlackRock.com, 2023. (Based on a 2017 landmark study that looked at retirement spending.)
3. ©2024 EBRI/Greenwald Research Retirement Confidence Survey https://www.ebri.org/docs/default-source/rcs/2024-rcs/2024-rcs-release-report.pdf
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
The RCS is the longest-running survey of its kind, measuring worker and retiree confidence about retirement, and is conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research. The 2024 survey of 2,521 Americans was conducted online January 2 through January 31, 2024. All respondents were ages 25 or older. The survey included 1,255 workers and 1,266 retirees – this year included an oversample of 721 completed surveys among military individuals (298 workers and 423 retirees).