You Might Spend Less – Later In Retirement

June 24, 2020

A 2019 whitepaper by the Employee Benefit Research Institute (EBRI) indicates that Americans tend to spend less as they age. 

EBRI analyzed a study from the University of Michigan, which tracked spending levels of Americans aged 50 or older for 12 years. Looking at this data, EBRI found that households headed by people aged 75 or older typically lived on 20% to 25% less per year than those aged 65 to 74. 

For that matter, they spent an average of one-third less each year than households aged 50 to 64. Average housing, clothing, food, transportation, and entertainment expenses all declined with time, and there was also a slight decrease in charitable contributions. Health care expenses, unsurprisingly, were the exception. Hobbies, traveling, and socializing during the early years of retirement tend to promote household spending, EBRI notes, while inflation pressure seems to be a factor in reducing it. In conclusion, EBRI observes that, “retirees are adept at adjusting their consumption as needed in order to fit their circumstances.”¹