Asset Decumulation or Asset Preservation? What Guides Retirement Spending?

April 2018
EBRI Issue Brief #447
Paperback, 12 pp.
PDF, 789 kb
Employee Benefit Research Institute, 2018

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Executive Summary

The Employee Benefit Research Institute (EBRI) undertook a study examining the extent to which the non-housing assets of certain retirees changed during their first 20 years of retirement (or until death, if earlier).

  • The study relied on income and asset data from the Health and Retirement Study (HRS), the most comprehensive survey of older Americans in the country, and on spending data from the Consumption and Activities Mail Survey (CAMS), a supplement to HRS. All numbers are measured in 2015 dollars. The study shows that retirees generally exhibit very slow decumulation of assets. 
  • More specifically, within the first 18 years of retirement, individuals with less than $200,000 in non-housing assets immediately before retirement had spent down (at the median) about one-quarter of their assets; those with between $200,000 and $500,000 immediately before retirement had spent down 27.2 percent. Retirees with at least $500,000 immediately before retirement had spent down only 11.8 percent within the first 20 years of retirement at the median. 
  • While some retirees do spend down most of their assets in the first eighteen years following retirement, about one-third of all sampled retirees had increased their assets over that period.
  • Pensioners were much less likely to have spent down their assets than non-pensioners. During the first 18 years of retirement, the median non-housing assets of pensioners (who started retirement with much higher levels of assets) had gone down only 4 percent, compared to 34 percent for non-pensioners.
     
  • The median ratio of household spending to household income for retirees of all ages hovered around one, inching slowly upward with age. This suggests that majority of retirees had limited their spending to their regular flow of income and had avoided drawing down assets, which explains why pensioners, who had higher levels of regular income, were able to avoid asset drawdowns better than others.