Planning for retirement income usually accepts that retirees can get by on far less than their pre-retirement income, as their expenses will be lower. But when it comes to household needs, spending barely declines at all, according to a report from Statistics Canada.
Looking at spending and income patterns from 1982 and 2008, StatsCan found Canadians in the early 70s spent only 5% less on goods and services than they did in their late 40s. Meanwhile their incomes declined by 16%.
The study included all items that meet the consumption needs of household members, but excluded gifts and charitable contributions, pension plan contributions, insurance premiums, taxes and savings.
Some of those excluded costs, like pension contributions, would have added substantially to the cost of living in their 40s. On the other hand, insurance premiums may have been higher among retirees.
While total spending was little changed, what they spent their cash on changed. In 1982, household heads in their late 40s, spent more than one-third on food, clothing, personal care and health care. In their 70s, that percentage fell to 28%.
Not surprisingly, healthcare on its own rose from 3% of spending to 6%.
In their 40s, household heads spent just over 30% on residential costs. Among retirees in 2008, that had risen to 43%.