The conventional wisdom is that people spend less money in retirement—that their consumption declines as they stop drawing a paycheck—and that they then travel less, cook at home more, stop buying made measure suits for work and stop spending money on gas or train fare to get to work.

But a new study from the Center for Retirement Research at Boston College calls this an incomplete view formed by studies that have focused mostly on the first few years after retirement. In the long term, households with more wealth—with healthy members—will continue to consume at a steadier rate.

“On average, household consumption declines about 0.7% to 0.8% a year over retirement," the study said. "However, consumption for wealthy and healthy households is virtually flat, declining only 0.3% a year over their retirement. Thus, at least in part, wealth and health constraints help explain the observed pattern of declining consumption.”

The study, called “Do Retirees Want Constant, Increasing, Or Decreasing Consumption?” raises a red flag about possible retirement shortfalls if people spend at a sustained level, according to study authors Anqi Chen, the assistant director for savings research at the center, and Alicia H. Munnell, the center’s director and a professor at Boston College.

It also means Social Security is going to continue to be important to those trying to maintain their spending, they wrote.

“Most previous studies have looked at the change at retirement, finding a sharp post-retirement drop as retirees consume less than they did while working,” they wrote. “This decline has been called the ‘retirement consumption puzzle,’ as it seemingly contradicts the life cycle model’s prediction that people smooth their consumption over predictable income changes, like retirement.”

Studies have looked to the reduction in travel and food expenditures—and the possibility that ill health has forced some people to reduce their spending—to explain these drops. “While these three factors explain the change in consumption at retirement, they do not extend to consumption changes during retirement,” the report said.

The authors say that studies such as the Consumer Expenditure Survey cover only a short period. The Chen-Munnell study used three surveys from the University of Michigan to study consumption over longer periods and see which types of consumption are constrained by wealth: (the studies are the “Health and Retirement Study,” the “Consumption and Activities Mail Survey” and the “Panel Study of Income Dynamics.”)

“The results show that when households have assets and their health, they keep real consumption relatively flat over their retirement,” the paper said. “This pattern is evident when comparing wealthy and healthy households separately and when the top tercile is ranked by health status.

“For those with less wealth or with health issues, consumption declines more over time. As a result, looking at all types of households together produces a clear pattern of declining consumption, as reported in other studies. But the results suggest that the decline most likely reflects wealth and health constraints as opposed to true preferences.”

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