It’s common to hear about an impending “retirement crisis” due to the modest levels of savings that most people have as they move into old age. And indeed, per the Federal Reserve’s SCF (Survey of Consumer Finances) data, the median person age 65-75 has $200,000 in savings (as of 2022, anyway). In other words, using the 3-5% retirement spending rates that people often discuss, the median retiree is looking at retirement income that could be described as “Social Security, plus several thousand dollars per year.”
One recent piece of good news comes from retirement researcher David Blanchett. Blanchett examined data from the Health and Retirement Study (HRS), and found that, when consumption level is held constant, financial well-being increases significantly for older Americans. (In other words, people are likely satisfied with decreasing levels of spending as they age.) Similarly, he found that financial well-being declines for only approximately 7% of households moving in retirement, despite the fact that consumption declines by approximately 20%, on average.
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