I’m turning 57 this year, which certainly means I’m on the downhill side of the mountain. Not just in age / likely lifespan, but also in annual spending.
This JP Morgan chart shows ‘the other side of the mountain’ in spending. The average American household slows spending quite a bit as they age … more than I would have guessed.
I’m seeing a pretty steady 35% drop in spending from this chart between my age (55-59) to age 80-85. That’s despite our health care costs rising over the next 20-25 years.
We certainly didn’t put that kind of spending reduction into our early retirement plan. We have just a one time 10% reduction put in at our age 80. it’s good to be safe, I guess, but the difference between the ‘average actual’ and our plan is a huge amount of money over that stretch of time.
I heard a personal finance ‘expert’ (Bill Perkins) on TV the other day that said 90% of people die with about the same amount of money they started retirement with. He believes that people can spend (and give away) much more than they think.
The difference is enough for me to want to dig a bit deeper into our plans and see if any revisions are warranted. How do you have your spending forecasted into your 70s & 80s?
Image Credit: Pixabay; Chart: JP Morgan
MrFireStation 
For simplicity, I have projected spending in my sunset years to increase only at the rate of inflation. It is easy to categorize gifts as spending. After all, there is not a U-Haul capable enough to move leftover treasure across the River Styx.
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With my extra $$$ at my passing, I’m going to instruct my son to build a large pyramid. 😉
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I retired based on a planned income designed to stay ahead of inflation, and having one of my two youngest children graduate from college, thus lowering my expenses by a lot. During the recent history this fiscal conservatism has been a good thing, because I did not bake Covid-19 and a financial illiterate like Biden becoming President into my plan.
I can see several drivers lowering my expenses in the future. Later this year, I qualify for Medicare, and that will lower my health insurance expense by $9,000 pretax or $5,400 post tax. My youngest graduating from college will another big raise. If my two youngest children move out of the house, I can reduce my car fleet by two vehicles, lower my insurance, and my food cost will dramatically reduce. The one cost that I expect we will see raise, is already my biggest household expense and that’s taxes.
Considering my plan in light of this study and my own observations, I may have been too Conservative in my planning.
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Yeah – it sounds like you have some opportunity to spend some “fun money”. 😉
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Like Klaus, I have been too conservative with my planning. I am only 60 and in year four of retirement. I do “work” three months each year some forty hour weeks, some four hour, some zero. It doesn’t seem like work.
My challenges on the expense side……taxes. I earn too much from consulting and dividends! How is that? Dividends gat reinvested or stay at brokerage, I don’t need them to live. Consulting is fun, but taxing!
I finished taxes this weekend and I was satisfied with the results until I see how much more my quarterly payments will be this year. Yes, I could have done an IRA, but at 74 my RMD will be high, and likely put me into a higher tax rate.
A good problem to have I agree and my plan will be to increase giving, likely of assets that have appreciated to help with tax issues.
I won’t be giving to homeless issues. Those do good organizations in my area have failed. The same people live on the streets near me and are fine to accept aid but not rules. What’s happened to treating all of society with a modicum of respect?
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Progressives would disagree, but I’d rather give to charities I support than have the government take my money for their purposes. We have organizations we are involved with that we feel good about and can see the impact our $$$ make.
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The Executives often pay themselves quite handsomely at the Homeless Non-profits. I used to work in Downtown LA, and I had a standard answer to the homeless who hit me up for money.
I would tell them today is your day. I am going to hook you up with a warm bed, clean clothes, a shower and meals. You and I can walk over right now to the Salvation Army Mission and I will donate money on your behalf so they can help you. They couldn’t run from me fast enough.
The real answer is tough love. The homeless break numerous laws every day. There needs to be two paths consisting of incarceration or rehabilitation by living under the rules of the Salvation Army. The likely outcome with most would likely be LA would losing its magnet status that attracts the homeless.
Coddling the homeless combined with good weather acts as a magnet to the degree that California has 50% on the nation’s homeless live here. One has to wonder if some of the homeless missions in places like Bismarck, ND consists of buying them a bus ticket to California. My way may sound mean, but the current status quo, the city might as well be setting up unlimited Fentanyl Buffets because they are enabling self-destructive behavior.
I have started doing my grocery shopping in Calabasas which doesn’t coddle the homeless. The difference between Calabasas and Woodland Hills is amazing. There are streets that you can drive in Woodland Hills that look like a scene from the Mad Max Movie Series.
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I agree with you. They are practically giving decent paying jobs away now and have lowered the bar on whom they would hire. Many “homeless” I see are young and in good shape. No excuse.
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