In this post we will revisit the planning implications of research that finds that household spending may decrease in real dollars as retired households age. This week we became aware of research in the U.K. that, like several other research reports we have discussed, shows that spending in retirement does decrease in real dollars, on average. Unlike other research, however, this research measured the sources of spending decreases in retirement and concluded:
- Much of the decline in consumption is explained by falls in spending on “non-essential items” such as recreation, eating out and holidays.
- Spending on essential items remains relatively flat during retirement, which means essential items account for an increasing proportion of the overall household budget. Indeed, by age 80+, over 50% of expenditure is on essential goods and services.
- There does not appear to be a post-retirement spending boom on leisure and holidays. In fact, from age 50 onwards, spending on most non-essential items begins a slow decline.
We believe the conclusions of this research are consistent with the thoughts we expressed on the planning implications of possible spending decreases in retirement in our post of December 11, 2021 where we said,
