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Good article saying American's in the middle and upper middle class are in better shape for retirement than they realize or gets written about. The article suggests that actual spending declines in real dollars when adjusted for inflation. So while your spending may initially be one about with time the real dollar amount declines and your fear or running out may also.
Recent studies indicate that while spending patterns shift in retirement, the overall trend in real dollars is down, and for the majority of retirees in the middle and upper income quintiles, they may find themselves with income that exceeds their spending.
"Your spending declines faster than inflation erodes your savings," said David Blanchett, head of retirement research at Morningstar. He said he dislikes using anecdotal evidence, but he has been talking and writing about this for some time, and he said he believes the vast majority of financial advisors with long-term clients have seen a similar pattern.
Certainly, plenty of people start retirement with a bang, taking a long-deferred trip or other splurge. That can push spending above preretirement levels in the first years of retirement.
However, spending tends to decline pretty quickly after that, the recent studies found. Households that spend $50,000 at age 65 tend to see a decline by about 15 percent over the next 15 years and 20 percent by age 85, according to Jonathan Guyton, a certified financial planner and principal at Cornerstone Wealth Advisors, in an article in the Journal of Financial Planning. Higher spending households, with $100,000 in consumption, see spending drop 20 percent by age 80 and almost 30 percent by age 85, he said.
Can help all of us to create what may perhaps be a more realistic real term need of our retirement spending. Could also help us be in better shape down the road for critical health care needs.
yes and no . while spending on our selves usually declines from the mid 70's to early 80's spending on others like kids and grand kids can take up any slack if you have the money to spare . that can increase as we age and don't need as much dry powder .
the wild cards are healthcare and long term care and you may actually need more by the mid 80's . when the two major study's were done on senior spending patterns both by ty berneckie (FPA Journal - Reality Retirement Planning: A New Paradigm for an Old Science and the study by sun life the costs and inflation in healthcare and long term care was very different .
I think this would have a gentle U shape ideally. More spending in early retirement as you travel, do things, etc., less in middle retirement, and more again in very old age before death.
those study's showed it was a smile shape back when they were done but if those study's were re-done today they may take on a very different shape because of health care increases and long term care increases
Guaranteed no spending on kids or grands during my retirement. For sure. I thought Firecalc already had a spending (income requirements) version of this on their site, IIRC?
Wildcard in any planning is what is your health condition and what is healthcare/medical inflation look like. One thing is certain as baby boomers age there will be increased demand for medical/healthcare services. What remains to be seen is a) what impact technology will have on medical inflation and b) will supply of services increase at anything close to increased demand.
All of the above are really unknowable, but generally speaking we're all rowing in the same boat...
Guaranteed no spending on kids or grands during my retirement. For sure. I thought Firecalc already had a spending (income requirements) version of this on their site, IIRC?
Yeah, I find it odd that retirees would spend large sums of money on adult children or grandchildren.
How Does Household Expenditure Change With Age for Older Americans? by Sudipto
Banerjee, Ph.D., EBRI
Home and home-related expenses is the largest spending category for every age group.
Health expenses increase steadily with age. In 2011, households with at least one member between ages 50 and
64 spent 8 percent of their total budget on health items, compared with 19 percent for those age 85 or over.
Health-related expenses occupy the second-largest share of total expenditure for those ages 75 or older.
The two components of household expenditures that show a declining pattern across age groups
are transportation expenses and entertainment expenses. Food and clothing expenses (as a share of total
expenditure) remain more or less flat across the different age groups.
There is a large increase in spending at the 95th percentile for those age 90 or older, which can be attributed to
very high health care expenses.
The overall expenditures decreases as people get older mainly due to the decreases in housing cost (figure 5).
However, the health care share of total household expenditures goes up from ~15% to ~23% from ~82 to 90 years (figure 6).
I think this would have a gentle U shape ideally. More spending in early retirement as you travel, do things, etc., less in middle retirement, and more again in very old age before death.
Yes, thread title is wrong
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