WASHINGTON – Just half of people who retired between 1992 and 2014 had income, savings, and/or non-housing assets to maintain the same spending level for five consecutive years after retiring, according to a new study released by the CFPB.
The findings were released as part of a first-of-its-kind study by the Bureau examining the financial resources and expenses of retirees during the first five years of retirement among Americans who retired between 1992 and 2014.
“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 CFPB said.
The Bureau said it found that the ability to maintain the same spending level in the first five years in retirement was associated with large spending cuts in later years.
In addition, the Bureau reported it further found the ability 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.
Other Findings
Among the other findings:
- 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%
- 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.
Decisions to Consider
The Bureau said the study highlights decisions to consider for protecting financial security before retiring. According to the study, 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.
The study can be found here.