Previously we posted about “reality retirement” planning (RRP) – the idea that the real spending levels of senior households typically decrease incrementally throughout retirement. RRP challenges traditional premises of retirement planning and concludes that the amounts needed to maintain living standards throughout retirement may not be as great as previously thought.

RRP is by no means a widely accepted retirement model. Still, the notion is founded on an analysis of real consumer spending data and shouldn’t be ignored by anyone planning important retirement financing moves – such as taking out a reverse mortgage.

The primary source of data on consumer spending is the . This data (summarized below) consistently shows a reduction in spending as households age. For example, the spending level of households age 75 and above is less than 75% of the level for households aged 65-74.

Obviously, data such as these are subject to widely different interpretations – e.g. to what extent are lower spending levels voluntary or “natural” versus being a forced outcome of lower spendable resources? Too, the “health care” category alone is a wild variable that could significantly alter the apparent age-spending trend.

Still, it is worthwhile to review this information and compare your own situation (both current and projected) against these national norms. Do you think your spending in the various categories will follow these patterns or is there reason to believe your costs will grow? Your answer will have significant implications in areas such as selecting a reverse mortgage payment option or even whether a reverse mortgage is truly necessary.

The complete , including a more detailed breakout of spending categories, can be found at the Bureau of Labor Statistics web site.

2002 Consumer Expenditure Survey
	Age
	45-54	55-64	65-74	75+
Apparel & Services	$2,029	$1,791	$1,252	$674
Entertainment	2,565	2,297	1,371	896
Food & Alcohol	6,693	5,979	4,803	3,446
Health Care	2,550	3,007	3,588	3,584
Housing	15,476	13,831	10,052	8,252
Transportation	9,173	8,449	5,731	3,178
Miscellaneous	4,939	4,138	3,593	3,028
Personal Insurance & Pensions	5,323	4,838	1,853	696
Total Average Annual Expenditures	$48,748	$44,330	$32,243	$23,759

2003 Consumer Expenditure Survey
	Age
	45-54	55-64	65-74	75+
Apparel & Services	$1,953	$1,562	$1,190	$611
Entertainment	2,407	2,414	2,016	909
Food & Alcohol	6,858	5,902	4,781	3,336
Health Care	2,479	3,059	3,626	3,856
Housing	15,624	13,714	10,761	8,678
Transportation	9,766	8,680	6,015	3,622
Miscellaneous	5,009	4,040	3,393	3,353
Personal Insurance & Pensions	6,003	4,819	1,847	651
Total Average Annual Expenditures	$50,101	$44,191	$33,629	$25,016