Spending trajectories after age 65 variation by initial wealth

TitleSpending trajectories after age 65 variation by initial wealth
Publication TypeJournal Article
Year of Publication2023
AuthorsHurd, MD, Rohwedder, S
JournalThe Journal of the Economics of Ageing
ISSN Number2212-828X
KeywordsBudget shares, consumption, Financial security of older adults, life-cycle model, Retirement saving

There has been extensive research on the importance of saving for retirement and on tools to 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. This study uses comprehensive longitudinal data on total household spending from a survey that is representative of the older U.S. population to estimate the trajectories of spending after age 65. Based on data spanning the period 2005–2019, real spending declined for both single and coupled households after age 65 at annual rates of about 1.7 percent and 2.4 percent, respectively. Stratification by wealth holdings observed at or closely following age 65 showed sizeable variation in spending levels by wealth quartile, but little variation in rates of change in spending. The fact that spending declines broadly, including among those in the highest wealth quartile, suggests that the decline may not be related to economic position. This view is supported by an analysis of budget shares which show increases with age in the budget share for gifts and donations which suggests that economic position on average does not deteriorate with age, even as spending declines.

Citation KeyHURD2023100468