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Nearly half of the retirees who provided information about theirfinancial resources and expenses as part of a nationwide surveysaid they did not have sufficient income to maintain the same level spending forthe first five years of retirement, a federal agency said in a newresearch brief.

The Consumer Financial Protection Bureau commissioned thestudy to pinpoint various ways would-beretirees can better prepare and also to take steps to minimizeracing through too much of their savings in the early years ofretirement. Certain financial decisions "may enhance or diminish"the ability to maintain spending levels, the study said.

"A growing number of retirees are not experiencing the expectedgradual reduction in spending after they retire," the CFPB said.The bureau said it found "the ability to maintain the same spendinglevel in the first five years in retirement was associated withlarge spending cuts in later years."

The research brief relied on responses to the Health andRetirement Study from individuals over the age of 50 who retiredbetween 1994 and 2012. The CFPB study, described as a first of itskind, did not attempt to make any conclusions about financialpreparedness over the full course of retirement.

Forty-nine percent of respondents said they did not havesufficient income, savings and/or non-housing assets to spend atthe same level for the first five years of retirement. Of the 51percent who said they could maintain spending levels: 27 percent ofretirees in that group said they were using pensions, SocialSecurity and annuities as their income, and 24 percent ofrespondents said they could maintain the same spending level after"adding the value of retirement accounts, savings, mutual fundsand/or other non-housing assets, such as vehicles orbusinesses."

The CFPB said it found retirement preparedness varied by factorsincluding race, sex, marital status, health and generation.

"More specifically, the ability to maintain the same spendinglevel for five years after retiring was higher among retired: menthan women, whites than non-whites, married than non-married, andwith a college degree than without a college degree," the CFPBresearch brief said. "Furthermore, a greater percent of retireesborn before 1946 than retirees born between 1946 and 1964 (babyboomers) had the ability to maintain the same spending level forfive years after retiring."

Entering retirement without a mortgage was "positivelyassociated with retirees' ability to maintain the same spendinglevel for five years," the CFPB said, as was choosing a monthlypension annuity rather than a lump-sum payout.

"In general, retirees with pension income had greater ability tomaintain the same spending level for five years after retiring thanretirees without pension income (73 percent versus 39 percent),"the consumer bureau said. "Among retirees with a pension, theanalysis shows that those who chose a pension cash-out were lessable to maintain the same spending level for five years afterretiring than those who chose to receive their pension as a monthlypayment (73 percent versus 56 percent)."

The survey also found that retirees who claimed Social Securityat retirement age, rather than claiming an earlier reduced benefit,contributed to the ability to maintain spending levels for fiveyears.

Mike Scarcella is a senior editor inWashington at law.com. Contact him at [email protected] and followhim on Twitter @MikeScarcella.

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