Spending, on average, generally decreases in retirement. But that doesn’t mean your spending will decline each year. Rather, spending will likely fluctuate greatly in retirement, according to recent research written by Sudipto Banerjee, a vice president with T. Rowe Price.
In fact, about one in four retirees experienced at least a 17% to 20% increase in annual spending over a two-year period, while another one in four experienced at least a 20% or 21% decrease in annual spending over a similar period, according to Banerjee’s research. Financial planners are noticing this volatility. “I’ve come across this a lot with my clients,” said Nicholas Bunio, a certified financial planner with Brookstone Wealth Advisors in Downingtown, Pa. Bunio and his colleagues have observed a notable uptick in expenditures on major home improvements such as new roofing and bathroom renovations, alongside significant investments in new heating and air conditioning systems, vehicle purchases, and indulging in once-in-a-lifetime dream vacations. “Oftentimes people underestimate what they are going to need to maintain and upkeep their homes,” said Monica Dwyer, a certified financial planner with Harvest Advisors in West Chester, Ohio. “They absorb those costs with ease when they are working and fail to factor them into the retirement plan.” Read: ‘We stay in two-star hotels’: We’re 70 and have $1.8 million, but my husband insists on living cheap. Don’t we have enough? Another often overlooked expense is cars, she said. “Some people think that the cars will last longer in retirement, or they estimate that they will not be driving as long as they do,” said Dwyere. “I encourage clients to plan to have at least one car their entire lives, even if they think they won’t be driving into their 80s.”
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In fact, about one in four retirees experienced at least a 17% to 20% increase in annual spending over a two-year period, while another one in four experienced at least a 20% or 21% decrease in annual spending over a similar period, according to Banerjee’s research. Financial planners are noticing this volatility. “I’ve come across this a lot with my clients,” said Nicholas Bunio, a certified financial planner with Brookstone Wealth Advisors in Downingtown, Pa. Bunio and his colleagues have observed a notable uptick in expenditures on major home improvements such as new roofing and bathroom renovations, alongside significant investments in new heating and air conditioning systems, vehicle purchases, and indulging in once-in-a-lifetime dream vacations. “Oftentimes people underestimate what they are going to need to maintain and upkeep their homes,” said Monica Dwyer, a certified financial planner with Harvest Advisors in West Chester, Ohio. “They absorb those costs with ease when they are working and fail to factor them into the retirement plan.” Read: ‘We stay in two-star hotels’: We’re 70 and have $1.8 million, but my husband insists on living cheap. Don’t we have enough? Another often overlooked expense is cars, she said. “Some people think that the cars will last longer in retirement, or they estimate that they will not be driving as long as they do,” said Dwyere. “I encourage clients to plan to have at least one car their entire lives, even if they think they won’t be driving into their 80s.”
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