Hello;
Average retirees surveyed in the US between age 62 and 75 found that 3/4 of them had seen their assets remain the same or grow in retirement.¹ (Barron’s Dec. 2021)
Why is that? - Here are some observations:
- Why the reluctance to spend? The fear of running out of money is the biggest reason. Retirees don't know how long they are going to live, what medical expenses they will face and how their investment portfolios will perform over decades. So they protect themselves by spending less than they could.
- A fear of needing long-term care also discourages retirees from spending down their nest egg
- Retirees are heavily influenced by the experience of family members. Certain clients who had parents die at a young age think very differently than people whose parents died in their 90's and needed care.
- Other factors affect spending rates. Research has found that retirees who get the most of their income from pensions spend more freely in retirement than those who rely on income from an investment portfolio
- A big predictor of how someone will spend in retirement is how they spend while they're working. Clients that tend to save money while working tend to keep saving money after they retire. And clients that tended to overspend while working keep doing so as retirees. You really cannot change the core values people have.
- Many people who have a lot of retirement wealth got there by living frugally as a matter of routine and that's a hard habit to break
- The study found that leaving money to heirs is usually a secondary motivation for restrained spending in retirement
The message is quite clear - each person has to live their life as they see fit!
Sincerely,
Mike Busby (16-May-2022)
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