Well, this is probably some news worth knowing.
CNN Money is reporting that, according to data analyzed by economists at the Investment Company Institute and the IRS, Americans are actually spending more money after they retire…at least, for the first few years.
It turns out that spending went up for over half of all taxpayers during the first three years after they claimed Social Security, with lower-income earners the most likely to spend more than they did before retiring.
According to the researchers, “For many individuals, retirement appears to be a multi-year transition rather than an action taken at a discrete point in time.”
In other words, retirees likely need some time to get the hang of living within their means.
Because the data measured did not pertain to spending, per se, but, rather, to how much income – including Social Security benefits - remained after taxes, it is unclear on what, specifically, retirees are spending their money in greater sums.
While many expenses tend to drop once a person retires, including taxes, costs associated with transportation, and those related to housing, others logically go up, like the amounts spent on leisure and recreation, including vacations.
The results of the research emphasize the importance of being able to generate a reasonably significant income during at least the first several years of what is ostensibly “retirement.” This may mean that individuals are well-served to keep working for years after beginning to draw Social Security; or, as younger adults, to dedicate themselves to setting aside as much as possible in tax-deferred retirement accounts invested largely in equities so that their savings, once they do stop working, is capable of generating a significant, monthly income.
By Robert G. Yetman, Jr. Editor At Large