Williams, F. L. & Zhou, H. (1997). Income and expenditures in two
phases of retirement. Financial Counseling and Planning, 8(2),
75-82.
Income And Expenditures In Two Phases Of Retirement
Flora L. Williams(1) and Helen Zhou(2)
The replacement rate – the ratio of retirement income to pre-retirement income — is a key part of
retirement planning, yet common advice is not based on research. This article reviews previous
empirical research and statements by financial planners, and presents an empirical analysis of
consumer expenditure data. Expenditures in the first phase of retirement were 71% and in the
second phase were 50% of pre-retirement income. These replacement rates should not necessarily
represent a goal.
Key Words: Financial planning, Retirement planning, Consumer expenditures, Replacement rates
Unpublished appendix with regressions (Acrobat format)
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1. Flora L. Williams, Associate Professor, Family & Consumer Economics, Department of Consumer Sciences & Retailing, Purdue University, West
Lafayette, IN 47907-1262, Phone: 765-494-8297. E-mail: floraw@purdue.edu
2. Helen Zhou, Consultant, Deloitte & Touche LLP, 700 Walnut St., Cincinnati, Ohio 45202, Phone: 513/651-5436