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The authors divided retirees into five groups, ordered by their wealth. Across all five wealth quintiles, average financial assets increased from 2000 through 2010. That is to say, after ten years of retirement most retirees had more financial assets than when they started
We all have seen the 4% (or even lower) spending down rule so it's interesting to read the author's recommendation
Quote:
The authors found that a retiree household with typical wealth could increase its annual spending by 8 percent over a 30-year retirement while still holding 40 percent of their financial assets in reserve against a health emergency or an extremely long lifespan.
This recommendation is based on the following finding
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But one simple reason is that retirees simply don’t spend that much. Yes, some retirees splurge on luxury cruises and other retirees are faced with high health care costs. But in the Survey of Consumer Finances, slightly over half of households aged 65 and over state that they don’t even spend the income they receive. About one-third of older households state that their spending is about equal to their incomes, while less than 15 percent state that their spending exceeds their incomes
I am not a well-to-do retiree but after reading this article, I think I will book a couple of trips and go out to eat in a nice restaurant ;-)
I would think the fear of overspending might actually force a high percentage to live within their means. It has also been pointed out many times here that the first few years of retirement at around 65 often come with high plans that cost money, but not too shortly after the bucket list is mostly done, they become tired and lose a lot of than enthusiasm, especially if they see savings that they worked had to build start to actually drop. A LOT of older people just can't stand the thought of SPENDING that money they worked so hard to save. I personally don't think I will jave that problem, but then, I'm not there yet. And also, compared to the average retiree, you ARE well to do!
A bit of topic but the Forbes article says $66,812 is top-20% income for 65+? I realize those are 2000 to 2010 averages but I would have thought there would be a lot more dual income married corporate, union, and public sector pension people bumping that up more.
I suspect that once I hit 70 and start collecting Social Security, I'll only be spending my required minimum distributions. My plan is to put a pretty big dent in it for the 4 1/2 to 5 years leading up to age 70.
A bit of topic but the Forbes article says $66,812 is top-20% income for 65+? I realize those are 2000 to 2010 averages but I would have thought there would be a lot more dual income married corporate, union, and public sector pension people bumping that up more.
I suspect that once I hit 70 and start collecting Social Security, I'll only be spending my required minimum distributions. My plan is to put a pretty big dent in it for the 4 1/2 to 5 years leading up to age 70.
..we found that most retirees could increase their consumption simply by spending all of their available income with no spending from financial assets.
On average, retirees in the lowest income group within each financial asset quintile consumed more than their income in a given year. Most retirees in the middle financial asset category spent more than their income, requiring some drawdown of assets from savings. Most retirees in the fourth and fifth financial asset quintiles, however, spent less than their income. In the fifth quintile, higher income retirees spent much less than their income.
...
Results show that retirees with median wealth have a consumption gap of approximately 8 percent on average, and that retirees with higher levels of wealth have a consumption gap as high as 53 percent
None of this takes into account saving for later life health care costs and options of where to be living at that time. If we ever reach a point where we are no longer saving and investing something went off course.
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