The typical retiree tends to have a modest lifestyle, largely because many don’t accumulate enough retirement income for extravagant expenses. In fact, only about half of retirees feel they’ve built a substantial nest egg. This observation comes from a recent Transamerica Survey.
That said, there are still a fair number of Americans who can afford to enjoy their retirement, especially given that spending generally declines with age. But, it’s important to note, retirement spending isn’t always about luxury, especially for those in their 80s.
Taking a broader view
Retirement can often be a time to settle debts like mortgages or car payments. Interestingly, even affluent individuals might find their day-to-day spending goes down, particularly if they aren’t traveling as much in their later years.
According to Transamerica, about 50% of retirees reported cutting back on their expenditures, while 39% claimed their spending habits remained unchanged. More details show that just 3% of retirees spend over $7,000 a month, and only 1% surpass the $10,000 mark, as indicated by an Employee Benefits Research Institute (EBRI) report.
In contrast, top earners in retirement see average monthly household expenses hovering around $12,508. This implies that only a small fraction of retirees match the average spending of those in higher income brackets, even though many upper-class retirees spend more than the typical senior.
What’s spending like at 82?
Though there’s limited data on spending for individuals aged 82, we can make estimations using Consumer Expenditure (CE) survey data. The data indicates that households in the highest income bracket spend approximately $12,508 monthly, which is around 94% higher than the average.
For younger retirees, from ages 55-64, average monthly spending is about $6,948. Between ages 65 and 74, the average dips to $5,429, reflecting a 22% decrease over ten years. Likewise, those over 75 see a decline of about 19%, averaging around $4,419.
However, CE surveys don’t provide specific expenditure data can be tricky for those 75 and older, so we approximate a spending decrease of about 2% per year. Assuming someone aged 70 has $5,429 in expenses, by age 82, we could roughly estimate their spending to be around $5,218.
Applying the previously mentioned 94% increase for high-income earners, that would elevate monthly expenditures to about $8,078. While this estimate isn’t perfect, it does align with findings from the EBRI study.
Ultimately, it’s clear that upper-class retirees spend considerably more than the average retiree, yet their expenditures still tend to be lower than what we see among upper-class households.
Even so, regardless of how secure you feel financially during retirement, having a solid spending strategy is crucial. Not only does it support your lifestyle now, but it also accommodates future goals like leaving an inheritance for loved ones. High-income retirees often face unique challenges, especially regarding real estate planning.
So, if you’re under the impression that you have ample funds for your retirement years, it’s probably a good idea to consult with a financial advisor. They can help ensure that you have effective strategies in place for spending, investing, and managing risks that will support your long-term objectives.
