Why Half of Retirees Have Funding Shortfall and How to Avoid the Same Fate

In a new study on the spending habits of retirees, the Consumer Financial Protection Bureau (CFPB) found that 49% of those who retired between 1992-2014 were not able to maintain the same level of spending in the first five years of retirement.

The study, "Retirement Security and Financial Decision-making," revealed that just 27% were able to maintain spending levels in that same period with income from pensions, Social Security, annuities, and other sources of regular income. Another 24% could spend at pre-retirement levels with income along with savings, investments, retirement accounts, and non-housing assets.

Furthermore, the study indicated that spending levels don't drop because people have fewer expenses or their spending preferences change. Instead, CFPB found that spending typically declines from an inability to meet expenses. Specifically, the analysis found that retirees who could not maintain spending levels reduced their expenses 28% from the first year in retirement to the sixth. Of that number, 17% reduced spending by 50% or more over that time frame.

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Source Fool.com