A new study from the Consumer Financial Protection Bureau 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.
The study highlights decisions to consider for protecting financial security before retiring. Just over half (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.
In addition, the Bureau found that the ability to maintain the same spending level in the first five years in retirement varied 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;
- 58 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;
- 81 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; and
- 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 can be found here: https://files.consumerfinance.gov/f/documents/cfpb_retirement-security-financial-decision-making_research-brief.pdf