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Study Finds Retirees Spending More Than Anticipated

Wishing they had done more to prepare for retirement, new research finds that nearly 40% of U.S. retirees are spending more than they expected and are having to cut back on common expenses.

Additionally, slightly less than half (49%) of pre-retired consumers (ages 40+) believe planning for retirement is more difficult for them than it was for their parents, according to the “Global Atlantic Retirement Spending Study: Perception vs Reality.”

Noting that numerous surveys indicate that Americans are financially unprepared for retirement, Global Atlantic set out to examine the finances of both retirees and those saving for retirement to determine how Americans’ expectations for retirement costs align with reality. The firm collected and analyzed data from more than 4,000 people across the United States.

It found that on average, the typical retiree spends 32% less ($2,008) per month than the typical non-retired U.S. consumer over 40, who spends $2,993 a month. In addition, the most common areas where retirees are spending less than pre-retirees include:

  • discretionary expenses such as entertainment (29% less);

  • dining out or restaurant take-out (24% less);

  • traveling (18% less); and

  • housing (23% less on mortgage payments and 22% less on rent).

Not surprisingly, the survey also found that retirees collecting income from pensions or annuities are able to sustain significantly more expenses than those who do not. The average retiree with a pension spends 39% more that those without a pension ($2,379 vs. $1,709), and just 20.5% less than pre-retirees. Those with an annuity spend 37% more than the average retiree who does not have an annuity ($2,545 a month versus $1,850 a month), and nearly 18% less than pre-retirees.

Planning Missteps

Meanwhile, retirees spending less than non-retirees may not be by choice, as more than half (55%) of retiree respondents expressed retirement planning regrets. The findings further show that the top three financial regrets are:

  • not saving enough (36%);

  • relying too much on Social Security (20%); and

  • not paying down debt before retiring (12%).

Women were found to be more likely than men to have retirement planning regrets at 62% versus 47%. Consequently, more women than men adjusted their lifestyle in retirement with spending cutbacks on restaurants and entertainment (51% versus 42%) and travel (42% versus 34%), the results show.

Retirees who do have annuities were found to be significantly less likely to have retirement planning regrets than those who do not have annuities (42% of those with annuities have regrets, compared to 58% who do not have annuities). Similarly, those with pensions are less likely to have regrets than those without pensions (43% versus 65%).

“Many Americans adjust their lifestyles and cut spending once they see how quickly costs can add up in retirement,” explains Paula Nelson, President, Retirement at Global Atlantic. “Our study indicates that while those with pensions and annuities still often make changes as they age, there isn’t as much of a need to drastically adjust their spending.”

Conducted by Echo Research between Sept. 12-24, 2018, a total of 4,223 consumers participated in the online survey of a random sample of the U.S. population age 40 and older, equally representing retirees and individuals not retired.