Do retired people reduce their spending?
I love longitudinal surveys. They are a great way to find out surprising things about ourselves. One such survey is HILDA, the Australian household survey where just under 10,000 households answer lots of questions about themselves each year. Thank you to the 25,000 people who participate in this survey every year and to the people at the shed social website for the analysis. One of the mysteries the latest survey solved was: “do retired people reduce their spending?” This is actually a very important question as much financial advice centres around the idea that people spend a lot of money when they are newly retired, then as they get older, reduce their expenses and increase them again when they are much older by spending more money on healthcare.
HILDA’s answer to this assumption? A raspberry… in other words it showed that the assumptions were incorrect. Retired people spend modestly throughout their retirement and they neither increase nor decrease their spending as a group until their mid-70s. We will have to wait another 10 years to know what they will do in their mid-80s. You can download the full report from the internet, just google ‘Hilda Survey’ (not many people have that name so google knows you want to find out about the household survey). Retired households in general do not spend a lot of money, with 80% of households at age 65 plus spending less than a commonly recognised ‘modest’ standard of living, which is just under $24,000 for a single person and $34,000 for a couple. In fact, the standard of spending for those aged 85 is almost exactly the same. In other words, it could be a good idea to plan for constant spending in your retirement and it is always great to have more money than just to live on the age pension. If you are planning for your retirement, even if it is a decade or two away or have recently retired, please feel free to give me a call and we can have a chat.