declining spending in retirement


B

beliavsky

A New York Times article

New Advice to Retirees: Spend More at First, Cut Back Later
By ILANA POLYAK
Published: September 25, 2005

at http://www.nytimes.com/2005/09/25/business/yourmoney/25save.html
discusses the view of some financial planners that since most retirees
desire less consumption as they age, it is rational for them to spend
at higher rates early in retirement. A paper

Reality Retirement Planning: A New Paradigm for an Old Science
by Ty Bernicke, CFP

cited by the article is at
http://www.fpanet.org/journal/articles/2005_Issues/jfp0605-art7.cfm .
 
D

dapperdobbs

Beliav... -

The article references medical expenses for retirees aged 75+ at some
$3,600 a year. That must be one heck of an insurance policy! I'd
factor in more like $3,600 a month in bills, for a total of $43,200 a
year - for medical / living expenses alone. And that's conservative.
Check out the middle to high-end of tri-level care retirement
communities lately? Skilled nursing ballparks around $70,000 a year.
 
A

Avrum Lapin

A New York Times article

New Advice to Retirees: Spend More at First, Cut Back Later
By ILANA POLYAK
Published: September 25, 2005

at http://www.nytimes.com/2005/09/25/business/yourmoney/25save.html
discusses the view of some financial planners that since most retirees
desire less consumption as they age, it is rational for them to spend
at higher rates early in retirement. A paper

Reality Retirement Planning: A New Paradigm for an Old Science
by Ty Bernicke, CFP

cited by the article is at
http://www.fpanet.org/journal/articles/2005_Issues/jfp0605-art7.cfm .
The articles provide an interesting perspective on spending in
retirement. However I am leery when one talks about averages without
showing a standard deviation. To place the word average in perspective
remember that the average person has one ball and one teat.

While it might be tempting to adopt the ³spend more at first, cut
back later² I am more worried about ending up eating canned tuna every
day.

My feeling is that in the first year of retirement the average
retiree will spend about 90% of what he spent the last full year of
work. The 10% delta is the pre tax equivalent of FICA etc deductions.
Obviously a person with high commute expenses or other high work related
expenses will spend less but the avid golfer may spend a lot more just
in greens fees.

I look at the ³big trip² or the kitchen remodel as being one time
expenses.

Nursing homes remain the big uncertainty but remember that only
half of us will end up there and half of those will be out within 3
years (in a box). There is always Medicaid to bail you out.
 

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