Retirement & Financial Planning Report

cola federal retirement april 2020 Image: Gorodenkoff/

Understanding how spending patterns vary with time during retirement, and why, can be “critically important” in setting up a personal financial strategy for retirement, according to an Employee Benefits Research Institute blog post.

An analysis of a survey it conducted shows both that retirees have widely varying spending patterns and that they change their patterns over time. “The data show that the average individual aged 55–64 spent $54,500 in 2017. By ages 65–74, spending had decreased on average to $50,300 however, and by ages 75–85 it came in at around $38,500,” it said.


Further, “not only does the amount of money being spent decreases, the propensity for people to spend heavily in certain areas also changes . . . the proportion of people who heavily spend on housing in retirement tends to decline over time: from 21 percent for those ages 55–64 to 17 percent for those 65 and older. In contrast, the proportion of those spending heavily on health care increases: from 10 percent at ages 55–64 to 20 percent for those ages 75–85.”

Meanwhile, certain types of spending such as gift-giving and contributions increase with age—making up about half of “discretionary” spending at 55–64 but more than 60 percent at ages 75–85. At the same time, spending on entertainment and food tend to decrease, as do expenses for transportation and clothing. Housing-related spending also decreases, although that was the biggest expense across all categories, it said.

Other key trends the survey found, it said, include that retirees “are more often interested in preserving or even growing their retirement savings than spending them down” and often build their spending plans around the distributions they are required to take from tax-favored retirement savings accounts after age 72.

It said EBRI plans further research to “gain a better understanding of what drives retirement spending decisions and how to optimize them.”

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