T. ROWE PRICE: HOME EXPENSES FIVE TIMES MORE LIKELY THAN HEALTH-CARE EXPENSES TO DRIVE SPENDING VOLATILITY IN RETIREMENT

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[{"type":"text","content":"BALTIMORE, Sept. 12, 2023 /PRNewswire/ -- T. Rowe Price, a global investment management firm and a leader in retirement, today published a new white paper analyzing data about spending increases and decreases in retirement years. According to T. Rowe Price's analysis, for households with less than $150,000 in annual income, spending volatility is largely driven by nondiscretionary expenses[1]. Specifically, the paper finds that among them, home-related expenses are the largest contributor to spending volatility during retirement, and they are five times more likely to drive spending volatility than health-related expenses. Home-related expenses accounted for 25.1% of the variance in spending, while health-care expenses accounted for 5.3%.[2]\n\nFurther, despite households experiencing an average annual spending decline of approximately two percent during retirement, the spending decreases in retirement are typically not uniform, with retirees experiencing meaningful ups and downs over time rather than a continuous decline.\nAdditional key insights from the data analysis include:\nOne in every two retirees experienced an annual spending increase of up to 25% at some point during retirement; one in four households experienced a 25-50% spending increase; and over one in five households experienced spending increases between 50-100%.[3] For retirees with annual incomes levels above $150,000, spending volatility was largely due to changes in discretionary spending.[4]Although the drivers of spending volatility can vary with household income levels, overall spending volatility was not correlated with investable assets or household income, suggesting that retirees of any level of investable assets or income could face a high level of fluctuation in spending.In addition to the analysis, the white paper provides insights on managing and preparing for potential spending volatility, specifically noting the importance of generating cash flows and implementing retirement income solutions that incorporate liquidity and growth opportunities. In the case of home expenses, the paper also suggests that advisors can help retirees by recommending strategies that minimize unexpected home expenses in retirement, like completing extensive repairs before retiring or right-sizing to a newer home with fewer repair needs.\n\"The basic financial objectives...

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