© 2009, by Karen Smith, Mauricio Soto, and Rudolph G. Penner from the Center for Retirement Research at Boston College:

More generally, our results indicate that most of the older population is extremely cautious in formulating their spending plans as they age. This may be because of a very strong bequest motive or because of a concern that they will face emergency expenditures, most probably related to health care. However, the conservatism is so extreme, especially among the more affluent, that one cannot avoid the suspicion that many are unnecessarily forgoing consumption.

According to the results of our regressions, the nonannuitized assets held by the top quintile of the income distribution actually grew in value up to age 85, all else equal. In the three middle quintiles, asset values fell slightly with age, but at such a slow rate that households were likely to die long before exhausting their wealth. These results refer to averages in the various income quintiles. Undoubtedly, there are some in the population who spend too lavishly while others are very clearly being too  conservative.

The picture changes significantly when we observe those who were in the bottom quintile of the income distribution in 2006. They spend down their annuitized assets quite quickly and end up relying on Social Security, DB pension plans, and welfare payments during their retirement. For those at the bottom who have worked fairly steadily at low incomes through their lifetime, Social Security generally provides an adequate replacement rate, especially for married couples. That may not be the case for those who have had low incomes because of an erratic work history.

Read the entire executive summary and working paper at CRR