3 Retirement Spending Surprises

𝟯 𝗿𝗲𝘁𝗶𝗿𝗲𝗺𝗲𝗻𝘁 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝘀𝘂𝗿𝗽𝗿𝗶𝘀𝗲𝘀 𝗳𝗼𝘂𝗻𝗱 𝗯𝘆 𝗝𝗣 𝗠𝗼𝗿𝗴𝗮𝗻 𝗮𝗳𝘁𝗲𝗿 𝗮𝗻𝗮𝗹𝘆𝘇𝗶𝗻𝗴 𝗺𝗼𝗿𝗲 𝘁𝗵𝗮𝗻 𝟱𝗠 𝗵𝗼𝘂𝘀𝗲𝗵𝗼𝗹𝗱𝘀 𝗶𝗻 𝗔𝗺𝗲𝗿𝗶𝗰𝗮.

While this may not directly translate to Singaporeans, but I do think that meaningful lessons can still be learnt.

Here are the 3 surprises found:

💹 𝟭. 𝗧𝗵𝗲𝗿𝗲 𝗶𝘀 𝗮 𝗹𝗶𝗳𝗲𝘁𝗶𝗺𝗲 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝘁𝗿𝗲𝗻𝗱.

The study found that there is a general trend on where we spend our monies across different sectors like healthcare, education, dining, etc. This trend can help us better estimate future expenses especially when we take into account inflation, which varies across different sectors.

The conclusion is that we tend to over-estimate inflation in future years as areas where inflation tends to be higher like education, housing and travel, we tend to spend less in them later on. The only outlier is healthcare, where we expect to spend more in later years and inflation is high on this sector.

⚡ 2. 𝗧𝗵𝗲𝗿𝗲 𝗶𝘀 𝗮 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝘀𝘂𝗿𝗴𝗲.

The trend found that our spending tends to peak at around 55-60, where we are typically at the intersection of maximum wealth and good enough health to enjoy it. Thus if we plan based on a constant required income throughout retirement, we may end up over-saving and delaying our retirement longer than necessary.

👪 𝟯. 𝗧𝗵𝗲𝗿𝗲 𝗶𝘀 𝘀𝗶𝗴𝗻𝗶𝗳𝗶𝗰𝗮𝗻𝘁 𝘃𝗮𝗿𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗶𝗻 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝗽𝗮𝘁𝘁𝗲𝗿𝗻𝘀 𝗮𝗰𝗿𝗼𝘀𝘀 𝗵𝗼𝘂𝘀𝗲𝗵𝗼𝗹𝗱𝘀.

Almost 80% of households experience substantial changes in their spending just before and after retirement. Every household is different and while these trends maybe useful for us to estimate future needs, we should all factor in the the fact that it is hard to accurately guess what my spending might be. And so we should all be prepared to adapt our investments and spending accordingly when the time comes.

Having an understanding of these findings, I can then have a meaningful conversation with my clients on retirement planning. The single retirement income goal of say $5k/m may need to be tweaked and adjusted to more accurately reflect real world applications when we retire.

You can download the study here: https://lnkd.in/gTdb3Xt4

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