Catherine Byerly, Writer
Cite Us
How to Cite's Article

APA Byerly, C. J. (2019, August 13). How to Prepare for a Change in Spending Habits during Retirement. Retrieved June 26, 2022, from

MLA Byerly, Catherine J. "How to Prepare for a Change in Spending Habits during Retirement.", 13 Aug 2019,

Chicago Byerly, Catherine J. "How to Prepare for a Change in Spending Habits during Retirement." Last modified August 13, 2019.

Why Trust
Why You Can Trust has provided reliable, accurate financial information to consumers since 2013. We adhere to ethical journalism practices, including presenting honest, unbiased information that follows Associated Press style guidelines and reporting facts from reliable, attributed sources. Our objective is to deliver the most comprehensive explanation of annuities and financial literacy topics using plain, straightforward language.

Our Partnerships, Vision and Goals

We pride ourselves on partnering with professionals like those from Senior Market Sales (SMS) — a market leader with over 30 years of experience in the insurance industry — who offer personalized retirement solutions for consumers across the country. Our relationships with partners including SMS and Insuractive, the company’s consumer-facing branch, allow us to facilitate the sale of annuities and other retirement-oriented financial products to consumers who are looking to purchase safe and reliable solutions to fill gaps in their retirement income. We are compensated when we produce legitimate inquiries, and that compensation helps make an even stronger resource for our audience. We may also, at times, sell lead data to partners in our network in order to best connect consumers to the information they request. Readers are in no way obligated to use our partners’ services to access the free resources on carefully selects partners who share a common goal of educating consumers and helping them select the most appropriate product for their unique financial and lifestyle goals. Our network of advisors will never recommend products that are not right for the consumer, nor will Additionally, operates independently of its partners and has complete editorial control over the information we publish.

Our vision is to provide users with the highest quality information possible about their financial options and empower them to make informed decisions based on their unique needs.

We all know that saving for retirement is a huge determining factor for how successful your golden years will be. But a new report is looking at the other side of the ledger – how much people are spending in retirement.

The Employee Benefit Research Institute released a longitudinal study on how spending changes in retirement.

“Understanding spending patterns will not only help current retirees succeed, but it will also help policymakers, employers, financial firms, and advisors assist current workers as they plan for a successful retirement,” said Sudipto Banerjee, author of the study.

Banerjee’s point makes sense: How can you know how much to save for retirement if you don’t know how much you will be spending?

“A person’s retirement financial success depends on two key components — savings accumulated during working years, and spending during retirement years,” he wrote in the report, “Quantifying these two components and their underlying behavior patterns is essential to understanding how people are likely to succeed in retirement.”

Key Findings

Post retirement, there tends to be a reduction in spending levels. According to the study, household spending goes down an average of 5.5 percent in the first two years, and drops by 12.5 percent by the third or fourth year. The study showed that after that, the decline slowed significantly. However, it can take a while for the spending reduction to level out.

Work expenses explained much of the drop off in spending. In addition, transportation spending goes down 25 percent – as retirees are no longer commuting back and forth to work.

It’s important to note that the study did find that in the first two years after retirement, 46 percent of retirees spent more than what they’d spent in the years immediately leading up to their retirement. Some spent a lot more: 28 percent spent 20 percent more than they did before retirement.

It wasn’t just affluent retirees who saw a boost in their spending either – the study showed that spend-happy retirees were seen evenly across different income levels.

“A possible explanation for this could be that people may want to splurge as they enter retirement by traveling or spending on their hobbies,” writes Banerjee. In fact, many seniors are starting encore careers well into their retirement as a way to give back, or capitalize on their hobbies.

What now?

It’s not unheard of for a retiree to live another twenty years after retirement, in fact, that’s the average.

Jamie Hopkins, Forbes author of “Retirement Risks: How to Plan Around Uncertainty For A Successful Retirement,” offers two suggestions to ensure you have spending money well into your retirement.

First, Hopkins recommends considering deferring your social security benefits. For each year you delay applying for benefits you get 8% more each subsequent year. Another option he offers is the purchase of an annuity to ensure you have guaranteed income.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 13, 2019