Spending in Retirement

29 Pages Posted: 18 Jun 2020

See all articles by Chris Browning

Chris Browning

Texas Tech University

Tao Guo

Morningstar, Inc. - Morningstar Investment Management LLC

Yuanshan Cheng

Winthrop University

Michael S. Finke

The American College

Date Written: December 1, 2015


Retirement savings adequacy estimates are often based on the assumption that individuals spend the same amount every year in retirement, and that the withdrawal rate to fund spending is based on spending down a percentage of retirement savings. We simulate safe consumption rates and compare the amount that wealthy retirees are spending to the amount they could safely spend given different asset return assumptions and investment portfolio allocations. Retirees in the top quintile of financial wealth are spending nowhere near an amount that would place them in danger of running out of money. In fact, the average financial assets of wealthy retirees increased during this time period and most retirees spent less than their income. Setting aside 40% of financial assets to cover uncertain longevity, medical costs, and bequests still results in a consumption gap as high as 47.3.% among higher-wealth retirees.

Keywords: Retirement spending, consumption

JEL Classification: D14

Suggested Citation

Browning, Chris and Guo, Tao and Cheng, Yuanshan and Finke, Michael S., Spending in Retirement (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=3609555 or http://dx.doi.org/10.2139/ssrn.3609555

Chris Browning

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Tao Guo (Contact Author)

Morningstar, Inc. - Morningstar Investment Management LLC ( email )

22 W Washington Street
Chicago, IL 60602
United States

Yuanshan Cheng

Winthrop University ( email )

304 Thurmond Bldg.
Rock Hill, SC 29773
United States

Michael S. Finke

The American College ( email )

Bryn Mawr, PA 19010
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics