Americans spend more money after retirement

Most people expect to spend less money after retirement. But that might not be the case, at least not at first.

More than half of taxpayers saw their spending increase in the first three years after claiming Social Security, according to a report based on tax data and analyzed by economists at the Investment Enterprise Institute and the IRS.

Those with lower incomes spent more than before retirement. Middle-income earners spent the same, and higher-income earners slightly less.

The report did not measure actual spending, but rather how much income an individual had left after taxes. It included wages and salaries, Social Security benefits, and distributions from retirement accounts and pensions.

“For many people, retirement appears to be a multi-year transition rather than a one-time action,” the researchers wrote.

In fact, almost half of people were still working three years after applying for Social Security.

Related: How Do I Know How Much I’ll Need in Retirement?

But that doesn’t mean spending won’t slow later in retirement, the researchers said.

Of course, your expenses can vary dramatically from year to year, especially if you plan to retire for 30 years or more. (Most of the people tracked in this report applied for Social Security at age 62.)

It’s hard to save for a moving target, but there’s a rule of thumb that experts recommend. He suggests that people prepare to spend about 70% of their pre-retirement income in retirement.

People expect to spend less because they’re not saving for retirement and your tax bill will go down. Maybe your transportation costs will go down if you don’t commute. Or you could have your mortgage paid off.

But on the other hand, you will have more time to travel and may spend more money on leisure activities, which is likely in early retirement.

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Three years after applying for Social Security, the average taxpayer’s income was 103% of their income in the year before the claim, the report said. It tracked people from 1999 to 2010.

CNNMoney (New York) First published July 28, 2017: 10:43 am ET