The Consumer Financial Protection Bureau (Bureau) today released a first of its kind study 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 study found that 51 percent 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. The Bureau also 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 found that 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.
- More than 70 percent of blacks and Hispanics are unable to maintain the same spending level in the first five years of retirement.
- Fifty-eight percent of men are able to maintain the same level of spending compared to 42 percent of women in the first five years of retirement.
- Eighty-one percent 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 percent.
- 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.
The study highlights decisions to consider for protecting financial security before retiring. According to the study, the 51 percent 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.