Retirees Aren't Spending Enough, Ep #231

Episode 231 of the Retirement Starts Today podcast, hosted by Benjamin Brandt, titled "Retirees Aren't Spending Enough, Ep #231" was published on February 14, 2022 and runs 18 minutes.

February 14, 2022 ·18m · Retirement Starts Today

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Episode Description

You may be worried about money in retirement, but are you worried that you won't spend enough of it? Today's retirement headline comes from Neil Templin over at Barrons.com and it examines how people's core spending and saving habits from their working years continue in their retirement years.

Listen to this episode to hear the author's suggestion for how to rectify this issue and whether or not I agree with him.

Outline of This Episode

[1:22] Retirees aren't spending enough
[5:30] Create a retirement paycheck
[7:20] My thoughts on the article
[10:00] join the newsletter
[11:07] How to invest for retirement with limited assets

Retirees aren't spending enough

Why do people continue to save in retirement when they are expected to be spending? Retirees Aren't Spending Enough of Their Nest Eggs, Here's Why, an article written by Neil Templin, examines the reasons why some people don't plan to spend down their assets in retirement. These retirees' portfolios remain the same or sometimes even grow at a time of life when they should be diminishing. The author looks into why this phenomenon is happening.

Reasons for reluctant spending in retirement

One study even revealed that ¾ of participants had seen their assets remain the same or grow in retirement. There are numerous reasons why this could happen.

The robust stock market over the past ten years could contribute to a steady or growing portfolio. However, even with strong returns, some people may not feel comfortable enough to loosen their purse strings and spend their savings in retirement. Templin lists these reasons for reluctant spending habits in retirement:

Fear of running out of money paired with uncertain longevity
Worry about future medical expenses
Concern over rising long term care costs
Learning from a parent's retirement experience
Spending habits from working years continue through retirement
Not wanting to be a burden on their children

It is difficult to change the core values that people have about spending. Saving is a habit developed over time and retirees are discovering that they can't simply flick a switch and turn it off.

A solution to reluctant retirement spending

The author next examines research on retirees with pensions. The research showed that those who received more than half of their income in regular payments spent much more in retirement than those who received less than half of their income regularly.

The article concludes that creating a pension-style income or regular paycheck by using annuities could be a solution for retirees who are reluctant to spend in retirement.

An alternative to purchasing annuities in retirement

My concern with purchasing annuities to solve this problem is that this solution eliminates the freedom to choose. With a flexible spending strategy, retirees can spend confidently. They understand that when the market doesn't behave ideally that there is always a plan b to fall back on. This flexible spending strategy relies on education and knowledge to give retirees the peace of mind they need to spend confidently. Listen in to hear how Guyton's Guardrails could inspire confidence in your retirement spending strategy.