Right-Sizing Retirement: Exploring the Retirement Consumption Gap in Early Retirement

The research described in this paper estimates the pervasiveness of underconsumption.
Specifically, this paper explores the retirement consumption gap and considers both
the wealth available to fund retirement—defined as either financial assets, such as a
taxable account or an IRA, or guaranteed income, such as Social Security retirement
benefits, a private pension, or annuity—and spending (i.e., consumption), both before
and after retirement. Considering both the assets and pre-retirement spending
provides a richer context around spending decisions during retirement. The analysis
uses data from the RAND Health and Retirement Study and focused specifically on
changes in spending during the first 10 years of retirement.