Retirement fudge factor: We spend less as we age

Posted1/2/2017 1:00 AM

Q: You often make note of longevity in your column. Let me offer a comment: The longer you live, the less money you need. For instance, if I need $1,000 a month and I am going to live 10 months, then I need $10,000. But if I only have five months to live, then I only need $5,000. I admit I am not taking into account that I may live longer, but take my case.

I am 94 years old. My wife and I are in reasonable health. We no longer travel or do much yard work or anything like that. So we don't need much money. At 94, I can't have much longer to live, so I don't need as much money as if I was 40 years old. How do you like my line of reasoning? -- B.H., by email


A: Millions of other retirees have had the same experience you and your wife have enjoyed: Spending tends to decline as we age. I think of it as a retirement planning "fudge factor."

So your experience isn't a fluke, and you're not unbearably tight with a dollar. You're just following the natural -- and kind -- path of aging.

What you've observed has been confirmed by multiple studies of consumer spending. The studies show that our spending tends to peak in our early 50s. It then declines until it levels out in our mid-80s. With the exception of medical spending, our costs decline across the board: shelter, food, autos, clothing and entertainment -- you name it, spending tends to decline as we age.

The decline isn't due to running out of money to spend, either. It's due to changes in what's important to us and to changes in our physical capacities.

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One of my favorite examples comes from my wife. She was buying bird food at Tractor Supply, a chain of farm equipment stores. She ran into a friend, a retired CEO of a major Dallas technology company. He was wearing a denim jacket, denim pants and work boots. He joked, "You know you're fully retired when most of your clothes come from Tractor Supply."

It's also interesting to observe the jewelry choices of older women. Over the last 10 years I've seen fewer older women wearing their engagement rings, favoring a simple gold band over bling. I'm sure readers could contribute a very long list of changes that have brought their spending down while having zero impact on their joy in life. There is a reason advertisers focus on the young.

Q: I read a lot of material on longevity. One of the things I have yet to see anywhere is the ranking of what category one is in based on their current assets, portfolio, etc., excluding their residence. Say, for instance, that one had $500,000 in financial assets; in what percentile would they be compared to the general U.S. population? Would they be in the top 20 percent, the top 10 percent, or what? -- G.D., by email

A: Data on where you stand in net worth compared to either all Americans, or all Americans of your age, is now readily available online. The website to visit is The "dqydj" stands for "don't quit your day job," evidence that the creators of the site have a sense of humor as well as substantial programming ability. This website will allow you to calculate where you are in the income distribution by age and a net worth by age calculator, among other things. It does not, however, make the calculation for financial assets only.


Here are some examples. If you are in your early 40s and have a net worth of $1 million, you're in the 92nd percentile, meaning that you have a greater net worth than 92 percent of other people your age. But if your net worth is "only" $1 million by your early 50s, you'll be in the 84th percentile.

Using their income percentile calculator, you'd see that an income of, say, $40,000 puts you at the 54th percentile, slightly over the median income.

Attaching income and education levels to longevity is far less developed. But an increasing flow of studies is showing that life expectancy for people at lower income and education levels is declining, while expectancy for people at higher income and education levels continues to increase.

• Scott Burns is a principal of the Plano, Texas-based investment firm AssetBuilder Inc., a registered investment adviser. Questions about personal finance and investments may be sent by email to


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