Spending Trajectories After Age 65: Variation by Initial Wealth

TitleSpending Trajectories After Age 65: Variation by Initial Wealth
Publication TypeReport
Year of Publication2022
AuthorsHurd, MD, Rohwedder, S
Series TitleResearch Reports
Document NumberRR-A2355-1
InstitutionRAND Corporation
CitySanta Monica, CA
KeywordsRetirement, Savings, Spending

There is a large body of work concerned with the importance of saving for retirement and with developing tools to facilitate and support the accumulation of retirement wealth. Much less attention has been paid to the decumulation phase—that is, the spending down of wealth following retirement. Understanding the decumulation phase requires information about the spending patterns of older households and how those patterns evolve with age.

The RAND Corporation has conducted extensive research on spending trajectories of older households. Building on this prior work, the authors provide statistics on household spending and its composition based on longitudinal data from the Health and Retirement Study. They present estimates of the trajectories of spending after age 65 among single and coupled households stratified by wealth holdings observed at or closely following age 65. According to the results, real spending declined for both single and coupled households. The rates of decline varied only modestly across initial wealth quartiles. The fact that spending declines broadly, even among those in the highest wealth quartile, suggests that the decline is not related to economic position. The authors discuss how the estimated trajectories can help with the prediction of households' spending needs at older ages.

Citation KeyRR-A2355-1