Retirement & Financial Planning Report

A study breaking personal spending patterns into categories has found that those patterns do not change in retirement for most, although with notable exceptions—saying that an understanding of personal spending can “provide additional insight for approaches to saving and investment for retirement.”

“Such analysis can also help in the development of more effective withdrawal strategies during retirement,” said the Employee Benefits Research Institute, using data from retirement and spending databases.


It identified four basic patterns of spending as: home spenders, households allocating 60 percent or more of their total spending to housing expenses; health spenders, who allocated 20 percent or more of their total spending to out-of-pocket health expenses; discretionary spenders, who allocate 25 percent or more of their total spending on the entertainment, gifts, and contributions categories; and typical spenders, who had no large variation in spending compared with the average.

Of the four, for example, the health spenders and home spenders were most likely to claim Social Security benefits early, for reasons including overall health and disability, while discretionary spenders were the most likely to claim them late, which “suggests that they are taking a gradual transition path to retirement.” Under Social Security, benefits can be claimed as early as 62, with the monthly benefit amount increasing for waiting until starting benefits, up to starting at age 70.

“The spending type that was most likely to remain consistent from ages 55–64 and 65–74 was the typical spender,” it said. “After typical spenders, discretionary spenders remained the most likely to remain in their same spending category over time.”

“Home spenders in the 55–64 age group had the highest probability of switching to a typical spender (48 percent) when they were ages 65–74. Health spenders showed the most movement, with only 28 percent remaining in this spending category from ages 55–64 to 65–74,” it said.

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