Weekend Reading: Right-Sizing Retirement: Exploring the Retirement Consumption Gap in Early Retirement

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Weekend reading right sizing retirement article Weekend reading right sizing retirement article
Weekend Reading

Are you over-saving for retirement? Are you under-spending once you get there? There’s a sweet spot for funding your retirement, but the reality is that many retirees haven’t found it.

Learn more about what the experts are observing in the realm of retirement spending patterns in this article from the Financial Planning Association below.


How much will your retirement cost? New research shows that many pre-retirees don’t have a clear picture of what future expenses will look like, and it’s leading to a pattern of underspending, dubbed the ‘retirement consumption gap.’

Data was pulled from families within the first 10 years of retirement, and revealed:

  • Financial assets declined for 65% of households
  • Spending declined for 75% of households
  • Only 18% of households saved enough to cover pre-retirement consumption, however, within those first 10 years of retirement, that number increased to 48%

Why? These retirees most likely had to 'right-size' their spending early in retirement to stay on course with their income stream.

At the other end of the spectrum, 29% of households had more wealth accumulated after 10 years of retirement but still continued to underspend. Whichever side you’re on, this research begs the question: Why save for retirement when you aren’t going to enjoy the fruits of your labor?

Bottom Line: The typical retirement calculator and guidance is wrong. Most retirees see spending declines in retirement, even over the first 10 years, yet most plans assume retirees will spend more. You could be better positioned for retirement than you thought.