Fifty-one percent of people who retired between 1992 to 2014 had income, savings, and/or non-housing assets to maintain the same spending level for five consecutive years after retiring – causing them to make large spending cuts in later years, according to study results release Wednesday.
In what it called a “first of its kind” study, the Consumer Financial Protection Bureau (CFPB) said its research found that the ability of retirees to maintain the same spending level in the first five years in retirement varies significantly by sex, race, marital status, health status, educational attainment, and generation.
“Given that a growing number of retirees are not experiencing the expected gradual reduction in spending after they retire, the study helps identify ways to protect retirees from overspending their savings in early retirement,” the agency said of its study, titled “Retirement Security and Financial Decision-making: Research Brief.”
The bureau said that the 51% of retirees who are able to maintain their same spending level after retiring were more likely to: not have a mortgage or other debt; have a traditional pension taken in monthly payments rather than in a one-time lump-sum; and claim their full or maximum Social Security benefits rather than reduced benefits at a younger age.
Among the other highlights of the study, CFPB said, were:
- More than 70% of blacks and Hispanics are unable to maintain the same spending level in the first five years of retirement;
- 58% of men are able to maintain the same level of spending compared to 42% of women in the first five years of retirement;
- 81% of retirees with a college degree or higher were able to maintain spending levels as compared to those with a high school diploma, at 52%; and
- Pre-baby boomers – those born before 1946 – were more able to maintain the same spending level in the first five years after retirement than baby boomers – those born from 1946 to 1964.