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How much will I spend in retirement? Less than you might think

Here’s what an analysis of retirees’ spending in their first 18 years of retirement revealed.

Money you save in your 401(k) and other accounts for your retirement takes decades to accumulate. But once you’re retired, how long will it last? That depends on the size of your withdrawals and spending habits, of course, but your spending in retirement may be less that you anticipate.

The Employee Benefit Research Institute learned the extent to which the non-housing assets of retirees changed during their first 18 years of retirement – or until they died, if earlier. It relied on income, asset and spending data from two previous studies. The results might surprise you, especially if you already have a retirement spending plan.

EBRI found that retirees generally spend down their assets quite slowly. Specifically, within the first 18 years of retirement: Individuals with less than $200,000 in non-housing assets at retirement had spent down about one-quarter of those assets, on average. Those with $200,000 to $500,000 had spent down 27%. Retirees with at least $500,000 at retirement had spent down only 12%, on average.

While some retirees do spend most of their assets in the first 18 years, EBRI said about one-third increased their assets during that period. Those with pensions were much less likely to have spent much of their assets. During the first 18 years, the median non-housing assets of pensioners (who started retirement with higher levels of assets) had gone down only 4%.

The median ratio of household spending to income for retirees of all ages hovered around 1-to-1, inching slowly upward with age, EBRI found. This suggests that the majority had avoided drawing down assets, which explains why pensioners, with their higher levels of income, were better able to avoid drawdowns.

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