The model used by many financial planners for retirement planning doesn’t accurately reflect how retirees spend during their early and middle retirement years, which means advisors might be overestimating how much their clients will need to save for retirement.
That’s according to the research of David M. Blanchett, head of retirement research for the Morningstar Investment Management Group. And although the headlines have been screaming for years that people aren’t saving enough for retirement, much less being told that their targets are too high, he’s receiving an award for his work.
Blanchett will be one of the recipients of the Financial Planning Association’s 2015 Montgomery-Warschauer Award in September for his article “Exploring the Retirement Consumption Puzzle,” which appeared in the FPA’s Journal of Financial Planning in May of 2014. The award is presented to the authors of articles appearing in the Journal the previous year that provided the most outstanding contribution to the betterment of the profession.
According to Blanchett’s article, “retiree expenditures tend to decrease both upon and during retirement. This decrease in spending is inconsistent with general economic theories on consumption, which suggest individuals seek to maintain constant consumption over their lifetimes.”