572 (Employee Benefit Research Institute, October 6, 2022). Spending in Retirement 5 Ibid. Preretirement Spending and Saving Behavior 6 Ibid. • Approximately half of retirees say they spend less than $2,000 each month, while 1 in 3 spend 7 between $2,000 and $3,999 each month. Sixteen percent spend between $4,000 and $6,999, Sabelhaus, John, “The Changing Nature of Protected Income in Retirement.” (Retirement Income Institute, Alliance Public-Sector Defined Contribution Plan Participants Spending in Retirement: By the Numbers (2022) 10 for Lifetime Income, July 2022). with only 3 percent spending $7,000 or more each month. • Households with public-sector DC plan participants who have a primary DB plan feel more 8 Bea •r den, On B ave ridgera t, ge, re “2022 tire Spee nding s rep in Re ort the tirem foll entowi Surnvg eym : Und onthly erst sp anding endin the g P aa llnde ocam tion: ic’s I 30 mp aper ct,” cE eBnRI t on Iss hou ue Brsin ief, g, no. comfortable spending than those without a primary DB plan. This comfort level may be 572 (Employee Benefit Research Institute, October 6, 2022). 11 26 percent on food, and 13 percent on health and medical. short-sighted for the households with newly hired public-sector DC plan participants, as the 9 Summary Statistics Ibid. • More retirees in 2022 say spending is higher than they can afford (17 percent in 2020 vs. 29 benefits from the primary plan are likely to be less than those of longer-tenured or retired 10 percent in 2022); Black and Hispanic retirees, as well as those in the lower annual household Ibid. ® • The E coh mpl orts. oyee As a Ben re efisu t Re lt, se the arc hh ou In se stit holds with ne ute’s (EBRIw h ’s) Re iretire s ma me y nn t ot Se b ce u as rity pre Propar jece tion d for Model retirem (R en St PM) 11 income brackets and poor self-reported health status, indicate their spending is higher than Ibid. 21 has determined that the aggregate retirement savings shortfall for all U.S. households ages 35–64 as they expect. 12 they can afford. 12 1 Ibid. as of January 1, 2020, was $3.68 trillion. (If all the retirement savings are exhausted and the • Public-sector households are, at the median, spending at or above their net income. • Twelve percent of retirees have increased their discretionary spending (vs. 8 percent in 2020); 13 Social Security and defined benefit payments are not sufficient to pay expenses, the individual is Ibid. 13 Savings rates in DC plans are correlated with the type of primary employer-sponsored plan 27 percent have increased their essential spending (vs. 23 percent in 2020). 14 designated as having run short of money.) 22 Copeland, Craig, and Lisa Greenwald. “2022 Summary Retirement Confidence Survey.” (Employee Benefit Research (e.g., defined benefit, defined contribution, or hybrid). • However, 36 percent of retirees say their overall spending and expenses are higher than • Savings are needed to pay for premiums for Medicare Parts B and D, the Part B deductible, Institute, May 14, 2021) expected — an increase from last year. Also up from last year is the share reporting that • Households with employees with a primary employer-sponsored DB plan are less likely to 15 premiums for Medigap Plan G, and out-of-pocket spending for outpatient prescription drugs. For a 14 Bearden, Bridget, “2022 Spending in Re 23 tirement Survey: Understanding the Pandemic’s Impact,” EBRI Issue Brief, Figure 8 housing and travel expenses, specifically, are higher than expected. contribute to a DC plan. no. 572 cou (ple Em re plotir yein e g Bein ne 20 fit Re 21sea with drug e rch Institute x, pen Octdi obture er 6, 2022 s at the ). median throughout retirement, the amount of Sources of Retirement Income • Among those who decreased either their essential or discretionary spending since the • The presence or absence of Social Security coverage appears not to have an impact on 16 100% necessary savings would have been $296,000 in order to achieve a 90 percent chance of having Zahra Ebrahimi, “Older Americans’ Spending Profiles: One Size Does Not Fit All,” EBRI Issue Brief, no. 520 (December pandemic, the most common reason cited by roughly 9 out of 10 retirees was concern about 24 2 spending behavior. Major Source Minor Source 10, 2020). sufficient money to cover health care expenses in retirement. 15 90 in% flation. 17 • Seventy percent of workers think they will work for pay in retirement, while only 27 percent of Craig Copeland, “Who Is Most Vulnerable to the Ticking Debt Time Bomb in Retirement: Families With the Oldest, • Total spending declines as retirees age, and allocations to spending areas such as 3 20% Black/African American, and Hispanic Family Heads,” EBRI Issue Brief, no. 521 (December 17, 2020). 80% All re W tire ore ks re ersport d 21% oing so. transportation become proportionately smaller over time as well. However, there are 18 • IbOve id. rall, more than half (55 percent) retired earlier than expected, while 40 percent say they retired • In addition, 70 percent of workers think they will work for pay in re 16 tirement, while only 27 70% considerable variations in older Americans’ spending patterns. 25 19 about when than expected and 4 percent later than expected. Black retirees (62 percent), those percent of retirees report doing so. Ibid. • The share of American families with heads ages 55 or older with debt increased continuously 60% with 2021 household incomes below $30,000 (69 percent), and those with a poor self-reported 20 • About 8 in 10 workers report being satisfied with the tools and resources available through 32% VanDefr rhom 19 ei, Jack98 , K ethrou lly Hagh 20 hn, and 19 K.a T the he rine 201 Roy 9 le , “vel In D of ata 68.4 Ther p e e Is Tr rceut nt h: U wande s ne rst aa rly 15 pe nding How rc e Hn ouseho tage p lds oin Ats ctually 4 health status (78 percent) are more likely to report they retired earlier than expected. Support Spending in Retirement,” EBRI Issue Brief, no. 531 (Employee Benefit Research Institute, June 24, 2021). 50 the % ir plan for both determining how much to save and determining how to generate income higher than the 1992 level of 53 17%.8 percent and 5.4 percentage points higher than the level in 21 19% Copelafr 20 nd, om the 07 Cr. aThis in ig, ir re Kelly tire c H re am a hn, a se en in th t nd saMa ve in inc ttgs. Pe ide tSi ern x sen, cin e of d ten “Spe e plan nding bt ha p aa s nd rt bie S ce a ipan v ning dts rive Besa ha ny in re vior the of y ce P hu n ab t ve re lic yea -Sers by c ce tor ive D d the efin in f e for d a m C m ont ilie ation rs with ibution 40% 43% Plan Participants,” EBRI Issue Brief, 17 no. 570 (September 19, 2022). 26 heads ages 75 or older. estimating how much monthly income their plan savings might be able to generate. 71% 69% 39% 19% 22 Sources of Retirement Income 30% Ibid. • Housing debt among older American families continued to dri 33% ve the level of debt payments in • Seven in ten (72 percent) workers feel somewhat or very confident in knowing how much to 28% 24% 23 2019. However, the incidence of credit card debt increased for families with heads ages both withdraw from their retirement savings and investments in retirement. This is not statistically Ibid. 41% 41% 21% 20% 17% • Similar to 2020, 7 in 10 in 2022 say Social Security is a major source of their income. Annual 35% 27 55–64 and 75 or older in 2019, and each age group of family heads experienced an upturn in 24 different by age. 14% Ibid. 17% 23% household income is inversely related to relia 18nce on Social Security as a major income source, 10% the median credit card debt held in 2019. 18% • Seventy percent of workers say that income stability is more important to them than 25 13% 13% 12% 7% Copeland, Craig, and Lisa Greenwald. “2022 Summary Retirement Confidence Survey.” (Employee Benefit Research 10% 10% 10% 4% where 82 percent of retirees with less $30,000 in annual household income say Social Security is a 5% 28 8% • Older American families with Black/African American or Hispanic heads had much higher debt- maintaining wealth when asked to compare these options. 4% 2% 3% 2% Institute, 0% May 14, 2021). major income source as opposed to 45 percent of retirees with greater than $100,000 in annual 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 2020 2022 to-asset ratios than families with white, non-Hispanic heads. The debt of the families with • Thirty-seven percent of workers say they are likely to manage their own savings, 28 percent say 26 5 Ibid. household income. 19 Your Social Spouse’s/Partner’s A Defined Benefit Personal An Individual A Workplace A Product That Work for Pay Disability Rental Income minority heads is more likely the result of consumer debt, not housing debt. they are likely to purchase a product that guarantees a set amount of monthly income for life, 27 Security Social Security or Traditional Retirement Retirement Retirement Guarantees Insurance Copeland, Craig, “Income Stability vs Maintaining Assets and Choices for Income in Retirement,” RCS Fact Sheet no. • Regarding employer-sponsored retirement plans, 54 percent of retirees say defined benefit plans • On average, households taking an individual retirement account (IRA) withdrawal prior to and another 26 percent would t Pena ske a ion Pla com n, bin Sava ing tio s or n of t Ah cce ou se nt approac or IRA Sav hie ngs. s P Worker lan, Month s age ly Incom s 55 e or 8, EBRI/Greenwald Research 2022 Retirement Confidence Survey. Where the Amount Investments, Such Such as a 401(k), for Life, Such as are a minor or major source of income, and 36 percent said defined contribution plans are a minor reaching the age for required minimum distributions appear to need the additional income to older are less likely to say they would purchase a product that provides guaranteed income for You Receive Is as Mutual Funds, Tax-Deferred an Annuity 28 6 Ibid. or major source of income. Typically Based on Certificates of Annuity or 403(b), support their current consumption levels. However, that may not be the case for households life than workers younger than age 55. In addition, workers with incomes of $75,000 or more Salary and Years Deposit (CDs) or Thrift Savings, 29 • The occurrence of protected income (pensions and annuities, excluding Social Security) in Ibid. taking more than the required minimum distribution after age 70-½. Across retirement wealth are more likely to say that they ofwi Sell rv ma ice na Ch ge the ecking/Sir av savin ings gs vs. those Mo with ney Purc in hasc e,omes below Accounts, Outside or Profit-Sharing 29 retirement, both realized and projected, is declining across and within birth cohorts. There are quartiles, there is more spending at almost all ages for households who have at least some $35,000. of an IRA or Plan 20 differences in receipt of protected income by age, gender, marital status, race/ethnicity, income, Workplace annuities and/or pensions. Retirement 7 and wealth. Endnotes Savings Plan • At time of transition to retirement, over half (57 percent) of retirees were aware of annuities, yet 1 VanDerhei, Jack, “Impact of Various Legislative Proposals and Industry Innovations on Retirement Income Adequacy,” only 3 percent overall said they had plans to convert any current income sources into a EBRI Issue Brief, no. 550 (Employee B 8enefit Research Institute, January 20, 2022). guaranteed income stream. 2 Fronstin, Paul, and Jack VanDerhei, “Projected Savings Medicare Beneficiaries Need for Health Expenses Spike in Source: Employee Benefit Research Institute Spending in Retirement Survey, 2022. • When asked to order seven features in a retirement income strategy by importance, retirees 2021,” EBRI Issue Brief, no. 549 (January 13, 2022) ranked “provides access to money” and “guarantees an income stream for life” as the top two 3 Copeland, Craig, and Lisa Greenwald. “2022 Summary Retirement Confidence Survey.” (Employee Benefit Research features. The bottom two features ranked were “preserves money for an inheritance” and Institute, May 14, 2021) 9 “provides an opportunity for growth.” 4 Bearden, Bridget, “2022 Spending in Retirement Survey: Understanding the Pandemic’s Impact,” EBRI Issue Brief, no.