Retirement In Sight: You Might Spend Less—Later in Retirement

You Might Spend Less—Later in Retirement

A 2019 white paper by the Employee Benefit Research Institute (EBRI) indicates that Americans tend to spend less as they age.

EBRI analyzed a study from the University of Michigan, which tracked spending levels of Americans age 50 or older for 12 years. Looking at this data, EBRI found that households headed by people age 75 or older typically lived on 20% to 25% less per year than those age 65 to 74.

For that matter, they spent an average of one-third less each year than households aged 50 to 64.

Average housing, clothing, food, transportation, and entertainment expenses all declined with time, and there was also a slight decrease in charitable contributions. Health care expenses, unsurprisingly, were the exception.

Hobbies, traveling, and socializing during the early years of retirement tend to promote household spending, EBRI notes, while inflation pressure seems to be a factor in reducing it. In conclusion, EBRI observes that “retirees are adept at adjusting their consumption as needed in order to fit their circumstances.”[1]

Are You Considering the Country Life?

A Harris Poll, conducted in May, of 2,030 U.S. adults found some interesting choices regarding where Americans would like to live at the moment, particularly seniors. The research firm discovered that the appeal of rural areas, or at least, exurban or suburban areas, may be growing as a result of the COVID-19 pandemic.

Harris asked adults if the pandemic made them want to live in an urban, suburban, or rural community. Forty-four percent of baby boomers (by Harris’ definition, those age 50 to 64) said that they would currently prefer to live in a rural area more than 20 miles from a major city.

Seniors (defined as respondents aged 65 or older) preferred inner-ring and outer-ring suburbs, perhaps influenced by the need to readily access health care services.

Thirty-nine percent of seniors preferred living in a community within 10 miles of a major city, and 21% preferred living in within 10 to 20 miles of a major city.

Just 15% of baby boomers and 7% of seniors told Harris that they would like to live in a major metropolitan city at this time.[2]

On the Bright Side

The deadline for filing your 2019 federal taxes has been extended to July 15, 2020. Correspondingly, July 15, 2020, is also your deadline for making 2019 IRA contributions.[3]

You may continue to contribute to a Roth or traditional IRA past age 70½ under the SECURE Act, as long as you meet the earned-income requirement for these retirement accounts. There is a phaseout of eligibility to make a Roth IRA contribution if your adjusted gross income falls within certain limits. These limits may be adjusted periodically by the Internal Revenue Service.

Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Lighthouse Financial, LLC and Cambridge are not affiliated.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

1 – PlanSponsor, October 4, 2019
2 – The Harris Poll, June 2, 2020
3 – Fox Business, March 20, 2020


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